Chapter One: Strategic Leadership: Managing the Strategy-Making Process for Competitive Advantage

More people seem to fear a snake bite than a dog bite, and yet statistically one is more likely to be bitten by a dog than by a snake. This is because people tend to estimate the probability of an outcome based on how easy the outcome is to imagine. This represents which of the following cognitive biases? a. Escalating commitment b. Hypothesis bias c. Availability error d. Representativeness e. Illusion of control

c. Availability error

Ralph is a well-liked manager at Aries Inc. He eloquently communicates the goals of the organization and has been successful in making the organization's vision part of its culture. Which of the following characteristics of good strategic leaders can be observed in Ralph? a. Authoritarian leadership b. Devil's advocacy c. Eloquence d. Inconsistency e. Empathy

c. Eloquence

Which of the following is NOT a characteristic of emotional intelligence? a. Self-awareness b. Self-regulation c. Escalating commitment d. Empathy e. Social skills

c. Escalating commitment

Which of the following statements about strategic leadership is true? a. It is the primary responsibility of the functional managers of an organization. b. It does not consider the task of maximizing shareholder value. c. It is involved with making decisions regarding how to create competitive advantage. d. It is a concept that does not apply to multidivisional companies with several business units. e. It is essentially about supervising workers at a manufacturing unit of an organization.

It is involved with making decisions regarding how to create competitive advantage.

Which of the following dimensions is encompassed by a company's business model? a. Configuring resources b. Avoiding focus on acquiring new customers c. Reducing emphasis on product quality d. Maintaining high costs e. Restricting growth

a. Configuring resources

Which of the following cognitive biases refers to the fact that decision makers who have strong prior beliefs about the relationship between two variables tend to make decisions based on these beliefs, even when presented with evidence that their beliefs are incorrect? a. Confirmation bias b. Reasoning by analogy c. Illusion of control d. Escalating commitment e. Representativeness

a. Confirmation bias

Identify the correct process for strategy-making. a. Formulation; Designing, delivering, and supporting products; Improving the efficiency and effectiveness of operations; Designing a company's organizational structure, control systems, and culture. b. Designing, delivering, and supporting products; Improving the efficiency and effectiveness of operations; Designing a company's organizational structure, control systems, and culture; Formulation c. Designing, delivering, and supporting products; Formulation; Improving the efficiency and effectiveness of operations; Designing a company's organizational structure, control systems, and culture d. Designing, delivering, and supporting products; Improving the efficiency and effectiveness of operations; Formulation; Designing a company's organizational structure, control systems, and culture e. Designing, delivering, and supporting products; Improving the efficiency and effectiveness of operations; Designing a company's organizational structure, control systems, and culture

a. Formulation; Designing, delivering, and supporting products; Improving the efficiency and effectiveness of operations; Designing a company's organizational structure, control systems, and culture.

Dave's Construction Company conducted a SWOT analysis which resulted in a need to implement business strategies that increase customer awareness and widen their customer base through better customer service to gain a competitive advantage in their industry. Which of the following business strategies would this describe? a. Functional-level strategies b. Business-level strategies c. Global strategies d. Corporate-level strategies e. None of the strategies are correct.

a. Functional-level strategies

Which of the following statements about the feedback loop in the context of strategy implementation is true? a. It provides managers with input for the next round of strategy formulation and implementation. b. It emerges within an organization without prior planning and in response to unforeseen circumstances. c. It cannot reveal whether a business model is working. d. It carries information from corporate-level managers to functional-level managers. e. It indicates that the strategy implementation process has ended.

a. It provides managers with input for the next round of strategy formulation and implementation.

Which of the following best defines shareholder value? a. It refers to the returns that shareholders earn from purchasing shares in a company. b. It refers to the capital invested in a company by the shareholders. c. It refers to the efforts taken by a company to sell its shares to prospective shareholders. d. It refers to the efforts taken by a company to buy back its shares from its shareholders. e. It refers to the non-monetary benefits that a company provides to its shareholders.

a. It refers to the returns that shareholders earn from purchasing shares in a company.

Which of the following principal factors helps increase shareholder value? a. Profitability b. Risk factors c. Low brand awareness d. Government regulations e. High production costs

a. Profitability

Which of the following statements about nonprofit organizations is true? a. They compete for scarce resources, just as businesses do. b. Their priority is to maximize shareholder value in order to attract risk capital. c. Their managers do not need to develop careful strategies, because making a profit is not the organization's goal. d. They do not have to worry about exceeding budgets. e. They seldom set any performance goals like profit-seeking organizations.

a. They compete for scarce resources, just as businesses do.

Edward Wrapp's ideas about the astuteness of power suggest that successful strategic managers: a. act as members of a coalition or its democratic leaders rather than as dictators. b. usually have little control over resources that are important to the organization. c. maintain tight control over as many decisions as possible by demanding complete obedience. d. publicly commit themselves to bold strategic agendas even if they are not rational. e. recognize the futility of pursuing planned strategies.

a. act as members of a coalition or its democratic leaders rather than as dictators.

. Mike, the chief executive officer (CEO) of a retail chain, wanted to keep costs low. To set an example for others, he drove his own car and furnished his office with plain, metal desks. In this case, Mike was displaying: a. commitment. b. ego. c. astute use of power. d. devil's advocacy. e. autocratic leadership.

a. commitment.

The first component of the strategic management process is: a. crafting the organization's mission statement. b. coming up with a damage control plan. c. analyzing the macroenvironment. d. determining the firm's employee turnover rate. e. deciding on a fit between the organization's strengths and weaknesses and the environment's opportunities and threats.

a. crafting the organization's mission statement.

. A component of strategy implementation is: a. designing the organization's control and reward systems. b. providing the number and kind of periodic reports that must be submitted by functional-level managers. c. defining the goals and objectives of the organizations. d. answering the question, "What is our business?" e. eliminating the feedback loop.

a. designing the organization's control and reward systems.

Good strategic leaders: a. possess a willingness to delegate and empower subordinates. b. control all facets of decision making. c. make decisions without consulting others. d. ensure uniformity of purpose through the authoritarian exercise of power. e. are usually inconsistent in their approach.

a. possess a willingness to delegate and empower subordinates.

Scenario planning is a technique for coping with the problem of: a. uncertainty. b. planning equilibrium. c. bottom-up planning. d. strategic fit. e. cognitive bias.

a. uncertainty.

Which of the following is a difference between a general manger and a functional manager? a. A general manager has no responsibility to the performance of the individuals of the company while the functional manager has an integral relationship with employee performance. b. A general manager is responsible for overall performance while the functional manager is responsible for a specific task or activity. c. A functional manager has the profit-and-loss responsibility for a product while the general manager is strictly dedicated to strategic planning. d. A functional manager oversees the operation of an entire division while a general manager develops strategies that help fulfill strategic objectives. e. General managers are closer to the customer than functional managers and their ideas may develop into effective strategic plans for the business.

b. A general manager is responsible for overall performance while the functional manager is responsible for a specific task or activity.

Which of the following identifies the difference between a mission and a vision statement? a. A mission statement describes where the company wants to be in the community while a vision statement declares the purpose the company serves to its' customer. b. A mission statement describes the "what", "who" and "why" while the vision statement describes the "where". c. A mission statement expresses the aspirations upon achievement of goals while a vision statement expresses functions and objectives. d. A mission statement illustrates results while a vision statement illustrates actions. e. A mission statement and a vision statement are interchangeable.

b. A mission statement describes the "what", "who" and "why" while the vision statement describes the "where".

Which of the following statements about emergent strategies is true? a. They are essentially the strategies that arise from feedback loops. b. An organization's capability to produce emergent strategies is a function of the kind of corporate culture that the organization's structure and control systems foster. c. They are the strategies that require the least amount of evaluation and strategic thinking from the managers. d. They cannot be combined with the intended strategies of an organization. e. They are the product of formal top-down planning mechanisms.

b. An organization's capability to produce emergent strategies is a function of the kind of corporate culture that the organization's structure and control systems foster.

Roza Munoz oversees the overall operations of Maxwell House, which is one of the divisions of the Kraft Heinz Company. Roza is also responsible for the overall performance of the business division. Which of the following is NOT likely to be one of Roza's responsibilities? a. Turning corporate-level strategy into action b. Defining Kraft Heinz's mission statement c. Deciding how to compete in the coffee industry d. Supervising functional-level managers e. Developing a business-level strategy

b. Defining Kraft Heinz's mission statement

Why is it important for leaders to gather information through informal and unconventional means? a. Formal channels can cause leaders to become overloaded with too much information and responsibilities. b. Formal conventional channels can be influenced by special interests and gatekeepers who choose what information to share. c. Formal channels can skew strategies which can result in poor performance and lack of focus. d. Formal channels often miscommunicate the vision of the company and disrupt the organization's culture. e. Formal channels encourage leaders to use their authority to force ideas through in order to accomplish goals.

b. Formal conventional channels can be influenced by special interests and gatekeepers who choose what information to share.

Which of the following statements about functional-level managers is true? a. They oversee the operation of an entire company or division. b. Their sphere of responsibility is generally confined to one organizational activity. c. Their activities and roles have no importance in realizing the strategic goals of an organization. d. They provide a link between the people who oversee the strategic development of a firm and those who own the firm. e. They occupy the apex of decision making within an organization.

b. Their sphere of responsibility is generally confined to one organizational activity.

Which of the following is NOT a characteristic of well-constructed goals? a. They are precise and measurable. b. They are lengthy and wordy. c. They specify a time period in which the goals should be achieved. d. They are challenging but realistic. e. They address crucial issues.

b. They are lengthy and wordy.

The scenario approach to strategic planning involves:v a. devising plans for coping with several different possible future states of the world. b. designing the best organizational structure and the best culture and control systems to put a chosen strategy into action. c. functional-level managers setting key corporate objectives. d. anticipating the reoccurrence of problems that were previously encountered and designing solutions accordingly. e. designing plans for problems that the company believes it will most certainly face in the immediate future.

b. designing the best organizational structure and the best culture and control systems to put a chosen strategy into action.

Beta Corp., a gaming software company, recently launched a new game. The target audience identified by the company was the age group of 12-18 years. The advertising and marketing strategies were designed exclusively to target this age group. However, sales data revealed individuals who belong to the age bracket 18-25 years were the ones who bought the game. The managers at Beta Corp. decided to redesign their marketing strategies to position the game as a product that people of all ages would enjoy. The company's decision to modify its product positioning demonstrates which of the following strategies? a. downsizing b. emergent c. deliberate d. concurrency control e. unrealized

b. emergent

Philip oversees the processes of the research and development department of his company. He is responsible for all the activities and tasks undertaken by the department. In the context of strategic management, Philip is most likely to be a: a. corporate-level general manager. b. functional manager. c. managing director. d. chief executive officer (CEO). e. business development manager.

b. functional manager.

Between 2010 and 2016, Blue Drinks, a multinational beverage corporation, increased its return on invested capital (ROIC) from $5 million to $25 million. The company was able to do this by expanding its product line to include a wider variety of flavors. The $20 million increase in its ROIC between 2010 and 2016 can be referred to as which of the following? a. Shareholder value b. Dividend payment c. Profit growth d. Profitability turnover e. Risk capital

c. Profit growth

Systematic errors in the decision-making process are most often caused by: a. inadequate information. b. information overload. c. cognitive biases of decision makers. d. poor data collection procedures. e. the devil's advocacy method.

c. cognitive biases of decision makers.

Jeffrey Pfeffer believes that a manager's power comes from his or her: a. ability to prioritize the well-being of the company over personal well-being. b. ability to be emphatic and understanding of the feelings and emotions of subordinates. c. control over important organizational resources. d. ability to cut overhead costs. e. personal rapport with the senior management.

c. control over important organizational resources.

Daryl works for Delta Corp. He is involved in the important decision-making processes of the company and is also responsible for the overall performance of the company. In the context of strategic management, Daryl is most likely a: a. line manager. b. functional manager. c. general manager. d. production supervisor. e. project manager.

c. general manager.

In a typical scenario planning exercise,: a. managers entirely depend on employee feedback. b. managers try to come up with alternative plans after a business model has failed. c. managers formulate plans that are based on "what-if" scenarios that are about the future. d. managers do a "postmortem" to understand what went wrong with a strategy. e. corporate-level managers set targets for functional-level managers.

c. managers formulate plans that are based on "what-if" scenarios that are about the future.

. Evidence suggests that the best way to maximize the long-run return to shareholders is to focus on: a. increasing prices. b. research and development goals. c. satisfying customer needs and making sure that employees are fairly treated. d. compensating managers well. e. maximizing employee overtime.

c. satisfying customer needs and making sure that employees are fairly treated.

Which of the following is the organization's principal general manager? a. Line manager b. Marketing division head c. Chief financial officer (CFO) d. Chief executive officer (CEO) e. Sales manager

d. Chief executive officer (CEO)

Which of the following cognitive biases occurs when decision makers commit even more resources to a project after they receive feedback that the project is failing? a. Prior hypothesis bias b. Reasoning by analogy c. Illusion of control d. Escalating commitment e. Representativeness

d. Escalating commitment

Which of the following statements about competitive advantage is true? a. It is unaffected by the strategies taken by the company. b. Sustainability is achieved when it lasts for three months. c. It exists only when the company's profitability is greater than the 10 highest grossing firms in the world. d. It exists only when the company's profitability is greater than the average profitability and profit growth of its rivals. e. It is seldom affected by the business model of the company.

d. It exists only when the company's profitability is greater than the average profitability and profit growth of its rivals

. A company, at its inception, states that its goal is "to provide the best customer service possible." Which of the following best describes this objective? a. It is the company's emergent strategy. b. It is the company's corporate structure. c. It is the company's HR strategy. d. It is the company's mission statement. e. It is the company's damage control plan.

d. It is the company's mission statement.

Which of the following is a benefit of dialectic inquiry? a. It increases the realizations of the possible dangers of the recommended plan. b. It is useful in countering biases. c. It constrains the usual optimism associated with strategic planning. with strategic planning. d. It promotes strategic thinking and allows a greater conceptualization of the problem. e. It emphasizes why a proposal is not an acceptable choice for solving the

d. It promotes strategic thinking and allows a greater conceptualization of the problem.

Which of the following refers to the investment that shareholders make in a company that cannot be recovered if the company fails and goes bankrupt? a. Profitability b. Shareholder value c. Debt d. Risk capital e. Return on invested capital

d. Risk capital

A general manager announces a new policy that includes an end-of-the year bonus for all employees if the company achieves its overall productivity goal. This is an example of a manager: a. neglecting shareholders' desire for maximum profitability. b. giving away money for no reason. c. losing the competition with other businesses for top talent. d. choosing to focus on employees to maximize shareholder value. e. setting a policy to increase his or her own income.

d. choosing to focus on employees to maximize shareholder value.

A company's mission: a. describes the marketing strategies the company intends to use to sell its products. b. outlines the manner that employees and managers should conduct themselves. c. defines how strategies will be developed and goals achieved. d. describes what the company does. e. describes the benefits offered to the shareholders.

d. describes what the company does.

Holly owns a landscape company and is thinking about expanding her services to include outdoor water features (waterfalls, streams, ponds). If, before making this decision, she looks at the experience of similar firms that have added outdoor water features, she is employing: a. reasoning by analogy. b. illusion of control. c. devil's advocacy. d. the outside view. e. dialectic inquiry.

d. the outside view.

Which of the following is a negative aspect of the ivory tower approach to the strategic planning process? a. It can lead to tensions between corporate-level and functional-level managers. b. The strategic role of autonomous decisions made by lower-level managers can be ignored. c. Decisions are made by top managers that are not connected to the day-to-day operations. d. It does not recognize the importance of the participation of managers at all corporate levels as a means for successful strategic planning. e. All of these are negative aspects of the ivory tower approach to the strategic

e. All of these are negative aspects of the ivory tower approach to the strategic

Which of the following statements about a SWOT analysis is true? a. It does not encompass the analysis of an organization's external environment. b. It essentially results in the generation of a single strategy that deals with one internal function of an organization. c. It does not encompass functional-level strategies directed at improving the effectiveness of operations within a company. d. It essentially produces strategies that are incongruent with each other. e. It is a methodology for choosing between competing business models

e. It is a methodology for choosing between competing business models

Strategy formulation refers to: a. executing corporate- and business-level plans. b. putting strategies into action. c. designing organizational structures and control systems. d. implementing emergent strategies. e. analyzing an organization's external and internal environments and then selecting appropriate strategies.

e. analyzing an organization's external and internal environments and then selecting appropriate strategies.

Overconfidence about their ability to succeed can lead top managers in a company to be prone to: a. prior hypothesis biases. b. escalating commitment. c. reasoning by analogy. d. representativeness. e. illusion of control bias

e. illusion of control bias

Within a diversified company, the responsibilities of corporate-level strategic managers include: a. supervising production at the manufacturing units of the company. b. compiling sales reports, company costs, employee productivity, and calculating the employee turnover rate. c. responding to employee complaints daily. d. providing leadership for the entire organization and allocating resources among its different business areas. e. maintaining records of transactions with suppliers.

providing leadership for the entire organization and allocating resources among its different business areas.