MGMT STRATEGY
Porter's main points in "what is strategy?"
- Strategy must help you gain a sustainable competitive advantage - If everyone can eventually do it, it is not sustainable > therefore, strategy = operational effectiveness - Operational effectiveness can be important IN a strategy, but it is not the same = getting better at the ting that you're doing (op. effectiveness includes six sigma, QM, JIT inventory management, improving production) FIT - Some sets of activities lend themselves to fitting together especially well, and others especially poorly -You need to pick which things to do and which not to do ... if you don't have to make a hard choice, then your competitors aren't going to need to either ... where there is a trade off, or a hard choice to be made - different competitors are going to make different choices
Industry Maturity
- growth? > High growth periods will have less intense rivalry
Industry Demand
- perishability of products - the more perishable, the more intense the rivalry will be
Bargaining power of suppliers
1) Relative Concentration 2) Purchase volume as a % of supplier sales 3) Availability of substitute products 4) Threat of forward integration 5) Switching costs
Relative concentration:
1) Relative concentration: > What is the relationship between the buyers and the industry? > Lots of sellers and few buyers = buyer power > For PC home users, there are a lot of buyers and few sellers -- so, home users will not have a lot of buyer power > Government corporations - there are a lot fewer buyers, and still a large number of possible sellers. So they will have more buyer power and be able to negotiate better prices
Place in order from first to last the steps in the devil's advocacy decision framework.
1) Team 1 formulates a course of action 2) Team 2 questions the assumptions of and critiques the proposed course of action 3) Team 1 revises the proposed coa based on the imput from team 2 4) Team 2 questions the assumptions of an critiques the revised course of action, and team 1 makes additional revisions 5) Team 1 and Team 2 agree upon a coa
The ratio of CEO to average employee pay in the United States is about ______.
300 to 1
__ strategy involves the decisions that senior management makes and the goal-directed actions it takes to gain and sustain competitive advantage in several industries and markets simultaneously.
Corporate
What are the factors in Michael Porter's model of national competitiveness?
Demand conditions Factors conditions Competitive intensity in a focal industry Related industries/complementors
______ refers to an increase in the variety of products and services a firm offers or markets and the geographic regions in which it competes.
Diversification
What question is asked along the horizontal axis of the markets-and-technology framework?
Does the innovation build on existing technologies or create new ones?
Which of the following is true of an M-form?
Each division operates independently.
Which bodies regulate mergers and acquisitions?
European Commission Federal Trade Commission
Place the five steps of the stakeholder impact analysis in order, with the first step at the top.
Who are our stakeholders? What are our stakeholders' interests? What opportunities and threats do our stakeholders present? What economic, legal, ethical, and philanthropic responsibilities do we have to our stakeholders? What should we do to effectively address the stakeholder concerns?
Burger Bomb has been outperforming other burger restaurants for a decade. This indicates that Burger Bomb has which of the following?
a competitive advantage
When identifying stakeholders, a firm should focus on those stakeholders that ______.
currently have, or could potentially have, a material effect on the firm
Which value driver would be the focus of a company that sells products that are similar to competing products and that provides a 60-day guarantee with no questions asked?
customer service
The idea of corporate social responsibility (CSR) suggests that a firm's obligations should ______.
exceed the traditional imperative to increase profits
Which of the following are important strategic dimensions in mapping strategic groups?
expenditures on research and development cost structure product and service offerings
The concept of a(n) ______ attempts to combine both learning effects and process improvements.
experience curve
Although ______ coordination, such as price fixing, is illegal in the United States, ______ coordination such as "an unspoken understanding" is not.
explicit; tacit
Which of the following terms describes applying current knowledge to enhance firm performance in the short term?
exploitation
The oldest form of internationalization is ______, which involves producing goods in one country to sell in another country.
exporting
When looking at the modes of foreign-market entry, one could conclude that ______.
exporting might be the earliest stage of commitment because it allows the firm to test whether a foreign market is ready for its products
Social consequences of business activities, including pollution, energy loss, and dangerous accidents, are known as ______.
externalities
Motivation that is driven by external factors, such as rewards or punishments, is called ______ motivation.
extrinsic
A country's natural, human, and other resources can be expressed in terms of ______.
factor conditions
Porter's diamond framework to explain national competitive advantage includes four interrelated factors: demand conditions, competitive intensity in a focal industry, related and supporting industries/complementors, and ______.
factor conditions
What do stakeholders want above all else?
fair treatment
Which of the following are characteristics of simple organizational structures?
flat hierarchies low formalization single leader makes all important decisions
Incentives that are too high-powered, such as an outsized bonus, may cause individuals to ______.
focus too much attention on the incentive and not enough on strategic activities
Which of the following are the four essential aspects of an organizational structure?
formalization specialization centralization hierarchy
If a company moves ownership of activities closer to the end customer, such as providing after-sales support, it is engaging in ______ vertical integration.
forward
Premium services cost money with complimentary basic services, is a description of which type of business model?
freemium
Firms that follow a single-business or dominant-business strategy at the corporate level generally employ a ______ structure.
functional
Thanh works in the engineering and manufacturing division of his company. Other departments include marketing, accounting, human resources, and research and development. Each department reports to the CEO. Thanh's company is organized according to a(n) ______ structure.
functional
Among the various types of responsibilities a business firm has, which are specifically considered to be economic responsibilities?
giving investors a return on invested capital repaying debts to creditors
A firm using a(n) ______ strategy is likely to have a multidivisional structure with the multiple divisions representing different products and centralized decision making.
global standardization
Multinational enterprises that manufacture commodity products that focus on cost leadership tend to use a(n) ______ strategy.
global-standardization
As utility companies tend to serve a whole market exclusively, they are known as ______ because the governments involved believe that the product or service would not be supplied otherwise.
natural monopolies
The positive effect that one user of a product or service has on the value of that product or service for other users is known as the ___.
network effect
Increases in the value of a product or service that result from a corresponding increase in the number of users are known as ___.
network effects
A partnership that is based on contracts between companies is referred to as a(n) ______.
non-equity alliance
In order to determine market capitalization, one multiplies which of the following together?
number of outstanding shares share price
Taki works for a start-up company that is highly centralized and its employees are not allowed to wear headphones while working. However, the company offers a flexible work schedule, free childcare, and free yoga classes. These rules and perks describe the company's ______.
organizational culture
Companies that transact in the open market incur ______.
external transaction costs
In ______ societies, competitiveness, assertiveness, and the exercise of power are considered ideal.
masculine
The economic recession that began in 2008 in the United States was the result of unwise investment in ______.
real estate
Which statement best describes the speed of innovation over the past hundred years?
It has accelerated dramatically.
How to compete on a business level is defined by the variables value and cost. Together they define the ______.
economic value created
Which of the following elements of the pyramid of corporate social responsibility are required by society?
legal responsibilities economic responsibilities
Which of the following statements about Airbnb is correct?
It handles more accommodations than the three biggest hotel chains combined.
How well the firms in an alliance fit together culturally is referred to as partner ______.
compatibility
When a firm covers a limited geographic area and is narrowly focused in terms of product/service offerings, a ______ structure is recommended.
functional
In order for a firm to lower costs, it must ______.
grow
A firm's competitive advantage is determined jointly by _____________ and firm effects.
industry effects
Economic value created is the ______ the cost to produce a product/service and the amount the buyer is willing to pay for it.
difference between
One of the largest customer segments of the market that includes customers who research the product, wait until new-product kinks have been resolved, and purchase from well-established companies is ______.
the late majority
A significant difference between the early majority and the late majority is that ______.
the late majority is not confident in using new technologies
The extent to which members of a society feel anxious when faced with an unknown situation is known as ______.
uncertainty avoidance
Private start-up companies valued at over $1 billion, such as some of those in the tech sector, are called ______.
unicorns
Core competencies of a business are generated by the interaction of ______.
resources and capabilities
Vertical Differentiation I
•Span of control (division of authority) •The number of subordinates that a single manager directly manages. •Organizational hierarchy choices •Tall structures •Many organizational levels •Narrow spans of control •Flat structures •Few organizational levels •Wide spans of control
True or false: The value chain concept is applicable primarily to high-tech firms in rapidly changing environments.
False
True or false: Industries often tend to follow a predictable industry life cycle.
True
Which of the following are important factors in determining the intensity of rivalry among existing competitors?
competitive industry structure exit barriers industry growth
Focus Strategy Opportunities
•Large firms may overlook small niches •Firm may lack resources to compete industry-wide •Better service to the niche •Focus on key parts of the value chain
The cube-square rule makes it _______ for smaller stores to compete with larger retailers.
harder
Which type of organization attempts to balance and harness different activities in trade-off situations?
ambidextrous organization
Global warming would be an example of ______ factor in a firm's external environment.
an ecological
At which level of the corporation should strategic alliances and mergers and acquisitions be managed?
at the corporate level
A firm uses the ______ business model when it sells a set of products that have different levels of demand for a price less than their total combined prices.
bundling
Netflix had a successful business model based on a large library of streaming content but then achieved even more success by also producing and distributing original content. This is an example of the potential value of ______.
business model innovation
When a firm goes bankrupt, shareholders ______.
cannot recover their risk capital
A statement of guiding principles that typically provides very specific ethical considerations is a(n) ______.
core values statement
The mechanism used to guide a company toward meeting its strategic goals within the bounds of the law is known as ______.
corporate governance
Which framework helps firms to identify their economic, legal, ethical, and philanthropic obligations to society?
corporate social responsibility
According to the VRIO framework, a rare resource is ______ if firms that do not possess the resource are unable to develop or buy the resource at a comparable cost.
costly to imitate
The negative effect of innovative ride-sharing services, such as Uber and Lyft, on traditional taxi cab companies is an example of ______.
creative destruction
Which of the following dimensions are considered in the CAGE distance framework?
cultural distance economic distance geographic distance administrative
A(n) ______ strategy attempts to increase the perceived value of a product while controlling costs.
differentiation
For a firm to sustain any competitive advantage over time, the fit between its internal strengths and external environment needs to be ______.
dynamic
Which type of alternative on the make-or-buy continuum involves competitive bidding by external companies hoping to acquire a temporary arrangement with a firm?
short-term contracts
Strategy is ______.
the set of actions a firm takes to achieve a competitive advantage
True or false: The chasm separating the early adopters from the early majority is the largest.
True
The introductory stage of the industry life cycle is a ______-intensive process.
capital
To determine the value of a good in the eyes of consumers, a firm can ______.
examine consumers' purchasing habits for their revealed preferences
Companies pursuing business-level strategies like cost leadership, differentiation, and integration should organize using a _____ structure.
functional
The organizational element that determines the organization's formal, position-based reporting lines is known as ______.
hierarchy
The reliance of McDonald's on detailed instructions to ensure consistent quality and service worldwide is an example of standard operating procedures as ______.
input controls
Which of the following are advantages of platform businesses compared to pipeline businesses?
They unlock new sources of value creation and supply. They benefit from community feedback. They scale efficiently by eliminating gatekeepers.
What three of the following are the primary benefits of horizontal integration?
a reduction in competitive intensity increased differentiation lower costs
At a basic level, the concept of "liability of foreignness" refers to the additional ______.
cost of doing business in an unfamiliar cultural and economic environment
The process in which change agents create new products or processes at significant economic risk is known as ______.
entrepreneurship
Companies seek to access international markets as a means of ______.
increasing their economic value creation
Which are examples of strategic control-and-reward systems?
input controls output controls organizational culture
Which isolating mechanism is set up to legally prevent companies from copying products that give a firm a competitive advantage?
intellectual property protection
Which of the following leads to systematic errors in decision making and hinders rational thinking?
cognitive biases
What are the two necessary conditions for successful alliance formation?
partner commitment partner compatibility
Although the three tasks of alliance management capability often occur at the same time, in general what is the first phase of alliance management?
partner selection and alliance formation
What is an important aspect of alliance success?
Inter-organizational trust
Three levels of Strategy
> Functional level strategy > Business level strategy > Corporate level strategy
Big Picture
> How profitable do we expect the industry to be? > How attractive is it? -> Which are the most important parts of the analysis?
Differentiation
•These brands offer a wide range of differentiated products, on the basis that their products are superior These are companies using differentiation. Graphics from Martha Stewart, Apple, Lexus
Bundling of products and services that are consumed in tandem to create value is an example of ______.
complements
A ______ strategy requires achieving the lowest costs in the industry while maintaining a level of value that is acceptable to customers.
cost-leadership
In the ______ step of the stakeholder impact analysis, the firm identifies the opportunities and threats that stakeholders present to the firm.
3rd
Internal Value Chain
If time, small groups to brainstorm ways that each function can be used for CA. Think of companies that do.
What must strategic leaders keep in mind if they are going to achieve successful strategic positioning? Multiple choice question.
To achieve strategic positioning, firms must make important trade-offs.
Which two of the following accurately describe organic organizations?
a flat organizational structure a low degree of specialization
According to Michael Porter, the profit potential of an industry is ______.
a function of five forces related to competition
Efficiency
> The quality of inputs that it takes to produce a given output (= outputs/inputs) *how efficiently can we produce a certain set of things?.. how little can we use to produce output? in terms of employees, capital, R&D > Employee Productivity: output per employee > Capital Productivity: Output per unit of investment capital -> R&D productivity: In research-intensive industries such as pharmaceutical industry > Efficient firms can outperform their less efficient counterparts
Which of the following statements is best illustrated by the decades-long business rivalry between the technology giants Apple and Microsoft?
A firm's competitive advantage is transitory.
Which of the following statements are correct regarding the interests of principals and agents?
Agents may be more interested in personal goals, such as maximizing their compensation or gaining power. Principals want to maximize shareholder returns.
Sociocultural factors
Are things changing in society? Do they change in a way that effect our business? Do we have fewer opportunities? Are people going to think less of our employees? *These may vary widely amongst different societies*
True or false: Sociocultural factors tend to be fixed.
False
Three Tests for Core Competence
To be a true "core competence", it must pass all three tests: 1.It provides potential access to a wide variety of markets *useful* 2.It makes a significant contribution to the perceived customer benefits of the end product *adding value* 3.It is difficult for competitors to duplicate
True or false: A horizontal integration strategy leads to industry consolidation.
True
Which of the following are questions that managers are likely to ask when beginning the strategic management process?
What are our values? What do we ultimately hope to achieve? How can we achieve our goals?
Many drivers find a GPS navigation system useful. Because installing a GPS system in an automobile adds value to the vehicle, the system functions as ______.
a complement
The hiring of a job seeker who claims to have extensive computer programming experience when his knowledge of the subject is minimal would be an example of ______.
adverse selection
The four-step innovation process begins with ______.
an idea
A key feature of an oligopoly is that the competing firms in the industry ______, meaning the actions of any one firm will influence the behaviors of the other firms.
are interdependent
The minimum efficient scale indicates the level of output needed to _______ the cost per unit as much as possible.
bring down
A(n) ______ is a unique strength, embedded deep within a firm, that is critical to gaining and sustaining competitive advantage.
core competency
A struggling retailer seeking to implement a blue ocean strategy is likely to experience difficulty with ______.
cutting costs and increasing value at the same time
Which of the following does the five forces model to help firms do?
gain and sustain a competitive advantage determine the profit potential of different industries
For a product that has a large economic value, a firm can choose to charge the same price as competitors in order to ______.
gain market share
One reason why a firm might enter into a strategic alliance is to ______.
hedge against uncertainty
Which of the following use codified policies and procedures to define and direct employee behavior?
input controls
Exit barriers, strategic commitments, and competitive industry structure are important factors in determining the _____________.
intensity of rivalry
The business structure that is linear and has producers at one end and consumers at the other is known as a(n) ______.
pipeline
The Boston Consulting Group growth-share matrix locates a firm's individual SBUs in which of the following dimensions?
speed of market growth relative market share
Economies of scale present an opportunity to increase profits because as the number of units within the relevant range increases, fixed costs ______.
stay the same
Equity alliances allow for the sharing of ______, which involves information that cannot be codified for completing tasks.
tacit knowledge
Capital, land, buildings, and plants are examples of ______ resources.
tangible
Cost Conditions
Eg. economies of scale/economies of scope
Generic Strategies
Industry (Broad): Cost Leadership Differentiation Niche (Narrow): Cost Focus Differentiation Focus LOW COST: Cost leadership Cost Focus UNIQUENESS: Differentiation Differentiation Focus
When a company's culture is defined and shaped by the people who start it, it is known as founder ______.
imprinting
In the five forces model, threat of entry refers to the risk that ______.
potential competitors will enter a given industry
It is common for firms to get their start by introducing a(n) ______ innovation.
radical
Which of the following risks do companies face when expanding internationally?
the liability of foreignness loss of reputation loss of intellectual property
The resource-based model views resources as ______.
the main driver of firm performance
True or false: In most cases, mergers and acquisitions create competitive advantage.
False
______ do not have physical attributes.
Intangible resources
Which of the following statements regarding factor conditions in Porter's diamond framework is true?
Natural resources are not necessarily needed to generate world-leading companies.
Which of the following statements about the maturity stage of the industry life cycle is true?
Only a few large firms remain.
______ factors result from the processes and actions of government bodies that influence the decisions and behavior of firms.
Political
Which of the following statements about legal factors as an external force is true?
Regulatory changes tend to affect entire industries at once.
Which of the following statements is correct?
Strategic initiatives can be the result of top-down planning or a bottom-up process.
Apple and Privacy
Which companies really care about customer privacy? (Apple? Google? Facebook? Microsoft? Amazon?) How can you know?
Corporate governance is a system of ______.
checks and balances
The pay-as-you-go model is ______.
gaining momentum
Which of the following are true of alliance management capability?
A firm may need to employ it with several different alliances. It involves partner selection and alliance formation.
What is the result of the airline industry having powerful buyers?
Airlines' profit margins are reduced.
If the problem with a business strategy results in causal ambiguity, managers will _______.
have a difficult time developing a theory to deal with the problem
A perfectly competitive industry has ______ entry barriers and ______ small firms.
low; many
Why do some firms choose alternatives to vertical integration?
to avoid the risks associated with vertical integration
5 Forces
- Start with a focal company -> define industry -> Look at each force/identify the actors in each category and map it out
Why do we need to conduct an industry analysis?
- To understand opportunities and threats confronting the firm - To use this understanding to identify strategies that will enable the company to outperform rivals
Long-term contracts typically last ______.
1 year or more
Steps in an industry analysis
1) Identify the industry that the company is competing in (often not obvious) 2) Determine the industry's boundaries (= the basic customer needs that are served)
Which of the following best describes an illusion of control?
a belief that a strategic plan will address any scenario
The code of professional conduct based on societal norms and expectations is known as ______.
business ethics
Unique features and attributes that differentiate a product from competitors' offerings allow the firm to ______.
charge premium pricing
During the decline stage of the industry life cycle, product innovation efforts ______.
come to a halt
Groupon's ______ was temporary since its resource was neither rare nor costly to imitate.
competitive advantage
Economies of scale are ______.
decreases in cost per unit as output increases
What is the primary focus of a customer-oriented vision statement?
developing goods and services that solve consumer problems
Introducing a new technology to an existing market to better address consumer needs is known as ______ innovation.
disruptive
Taking on an economic risk in order to innovate is known as ______.
entrepreneurship
Which of the following are types of strategic alliances?
equity alliances long-term contracts joint ventures
The persons responsible for forming corporate-level strategy are the ___.
executives
What are the four quadrants of the core competence-market matrix?
existing competencies with existing markets existing competencies with new markets new competencies with new markets new competencies with existing markets
In the ______ quadrant of the core competence--market matrix, a firm combines existing core competencies with existing markets.
existing core competence--existing market
Economist Michael Porter and many others argue that the value of public stock companies is too narrowly defined in terms of ______, leading to scandals and economic crises.
financial performance
The money a firm spends to set up a sales website can be considered a ______ cost.
fixed
An advantage of using a non-equity alliance to govern a strategic alliance is its ______.
flexibility and ease of initiation
The benefits of competing on a global scale exist ______.
for an increasing number of firms
Which of the following are examples of artifacts of an organization's culture?
formal vocabulary private offices dress code
economic responsibilities
gain and sustain competitive advantage
transnational
global matrix: balance of centralized and decentralized decision making, two layers of hierarchy (geographic and product)
A company's ______ is the part of a corporate strategy that addresses how to gain and sustain a competitive advantage when competing against other foreign and domestic companies around the world.
global strategy
During which stage does a standard develop?
growth
The stage during which a new product has gained some acceptance, thus causing first-time buyers to eagerly acquire the product and accelerate demand, is the ______ stage.
growth
During globalization 1.0 all important business functions were located in the home country, whereas during globalization 2.0 multinationals began to copy themselves _______.
in a few key countries
Under agency theory, a manager should seek to align ______ between principals and agents to minimize opportunism.
incentives
What are some managerial advantages of building a firm into a large organization?
increased power greater prestige more job security
Which statements about creating and implementing an effective business model are true?
irms must implement their competitive strategy blueprint through processes, procedures, culture, and structure. Firms must transform their competitive strategy into a blueprint of initiatives and actions that support their goals.
Tomas recently acquired a cell phone but only because his company insisted that he do so. Tomas likely belongs to which of the following consumer segments?
laggards
legal responsibilities
laws and regulations are society's codified ethics; define minimum acceptable standard
According to agency theory, conflicts such as the principal-agent problem are considered ______ issues.
legal
Deregulation of industries leads to intensified competition and higher value at lower prices for consumers. This is an example of ______ factors influencing business.
legal
In the airline industry, the ______________ of offering international routes restricts movement between hub-and-spoke and point-to-point airlines.
mobility barrier
The third step of stakeholder impact analysis requires managers to identify the ______ presented by internal and external stakeholders.
opportunities and threats
One of the disadvantages of a matrix structure is that ______.
reporting structures are often unclear
In performing a SWOT analysis to generate insights from external and internal analysis, internal strengths and weaknesses can be determined by applying ______ and external strengths can be evaluated in part by applying ______.
the VRIO framework; PESTEL
When companies get involved in a bidding war and the winner overpays for the acquisition, the acquiring company has fallen victim to the ______.
winner's curse
Governments sometimes set up a natural monopoly when a venture ______.
would otherwise not be profitable
Control Systems
•"You can't manage what you can't measure" •"The folly of expecting A while rewarding B" •Employees will respond to the organization's incentive system •Wages, bonuses, promotion, etc.
Focal
"focal firm" "focal industry" = the one we're focusing on
How do mergers and acquisitions differ?
A merger describes the joining of two independent companies, while an acquisition describes the purchase or takeover of a firm.
Stakeholder impact analysis is a decision tool that helps a company do which of the following?
Act as a good corporate citizen Achieve a competitive advantage
What is the first step in the AFI strategy framework?
Analysis
Competencies and Products
Core Competence feeds into the core products, which can then be distributed to the businesses and into end products.
What must a firm do after diagnosing its specific competitive challenge?
Create an effective guiding policy
Value Creation
Customer believes they will gain some benefit, they expect some benefit, whatever benefit they expect to get will be higher than the price they will pay. The total benefit they expect to gain is the Customer Surplus + Profits (Price-Cost) + Cost The net benefit for the customer is something less than above, because they will pay the selling price Selling price = profits & cost
In what way does the strategic alliance between GM and Lyft allow GM to hedge against uncertainty?
It gives GM access to the market of the future, in which traditional private car ownership no longer exists.
What is the overall purpose of strategic management?
Gain competitive advantage
Matrix Structure
In a matrix, everyone has two reporting relationships - typically functional and product. (Can also include geographic if that is what's important.)
Which of the following statements about the make-or-buy continuum is true?
The "make" and "buy" choices anchor each end of the continuum.
Core Competence - Tesla
Likely core competence: Battery technology, software
Which of the following best describes the core competency of the Five Guys Burgers and Fries company?
Making high-quality burgers without limiting costs
______ describes a process in which the options one faces in the current situation are limited by decisions made in the past.
Path dependence
Innovation
The act of creating new products or processes > Innovations give a company something unique that their competitors lack > Innovation is the most important part of competitive advantage in many industries Product innovation - The development of products that are new to the world or have superior attributes to existing products Process innovation - The development of a new process for producing products and delivering them
What are downsides of equity alliances?
The time and effort for assembling the partnership The amount of investment involved
A firm's network of interconnected activities is referred to a strategic activity system because activities that are interconnected are very difficult for competitors to copy effectively.
True
Using the "resource-based view" helps firms ______.
gain or maintain competitive advantage
What is a major disadvantage of organizing economic activity within firms?
the principal-agent problem
Which of the following were resources and capabilities that helped Five Guys gain a competitive advantage and develop into a successful restaurant chain?
Carefully choosing the supplier of the potatoes for their fries Focusing on such details as store layout and design
What is the commercialization of an invention called?
Innovation
An architectural innovation is ______.
a new product in which existing technologies are used in a novel way to create new markets
A company should only expand abroad if ______.
benefits outweigh costs
Which of the following tends to result in delayed response time and lower customer satisfaction?
centralized decision making
philanthropic responsibilities matches
corporate citizenship
In the early 2000s, easy credit made real estate the investment of choice in the United States. By the end of the decade, however, a recession had set in, impacting almost all businesses in the country. This example shows that _____.
economic boom periods can overheat and lead to speculative bubbles
What are the three mechanisms that alliances can be governed by?
equity alliances non-equity alliances joint ventures
To measure firm-level competitive advantage, a company must ______.
estimate the economic value created for all products and services offered by the firm
The expectations that society has toward business, in contrast to what society requires, result in which of the following elements of the pyramid of corporate social responsibility?
ethical responsibilities philanthropic responsibilities
Some foreign countries require companies to be structured as __ in order to enter that foreign market. The companies gain access to the market, while the country gains advanced technology and know-how.
joint ventures
The online auction site eBay has more than 100 million active users, so buyers are more likely to find what they are looking for while sellers are more likely to find buyers for the items they are offering. This is an example of __.
network effects
The most common type of alliance is a(n) ______.
non-equity alliance
In a global-standardization strategy, the main competitive element is ______.
reduced cost
A cost leader can achieve a competitive advantage by ______.
reducing costs below those of competitors while maintaining a similar value
Which of the following are factors in a firm's legal environment?
regulations laws mandates court decisions
Effective guiding policy is supported by and stays consistent through the use of ______.
strategic commitments
A firm's strategic profile based on value creation and cost is called its ______.
strategic position
The customer segment known as ______ enjoy testing product prototypes and providing voluntary feedback that companies use to perfect their products.
technology enthusiasts
The degree of vertical integration corresponds to ______.
the number of industry value chain stages in which a firm directly participates
Horizontal integration is a good option if ______.
the target firm will have more value when combined with the acquiring firm
Why does Facebook acquire startups?
to preempt rivals
Which of the following is a reason why a firm needs to grow?
to reduce risk
If an MNE wishes to be responsive to the needs of its local consumers but also wants to attain a lowest-cost position, it should follow a(n) ______ strategy.
transnational
According to the ______, effective leadership is the outcome of certain intrinsic talents as well as education. Multiple choice question.
upper-echelons theory
Organizational Design
•Combination of >Organizational Structure >Control systems
Which of the following types of questions does scenario planning ask?
"What if?"
Which of the following is true regarding the government and horizontal integration?
Large horizontal integration activity typically needs to be approved by government authorities.
Which type of organization has a flat organizational structure and employs decentralized decision making?
an organic organization
Production costs can increase when ______.
buyers demand higher quality and more service
Companies from wealthy countries benefit from cross-border trade with other wealthy countries when their competitive advantage is based on which of the following factors?
economies of experience standardization economies of scale
A fiduciary responsibility is a(n) ______.
legal duty to act in another party's interests
Strategic positioning allows managers to ______.
provide customers value while controlling costs
A board of directors is elected to represent the interests of ______.
shareholders
Focus Strategy Risks
•Could be "outfocused" •Could attract larger competitors who figure out your market •Niche market needs might shift to match those of broader market
Increasing Efficiency III
•Human Resources > Implementing training programs to increase skill sets > Implementing self-managing team > Implementing pay for performance •Information Systems > By automating process > Increase coordination and communication among divisions and partners •Infrastructure > Encourage company wide commitment to efficiency > Facilitate company wide cooperation > Creating appropriate organization cultures
Place the three frameworks used in industry analysis in the order they should be used, with the first at the top.
1) PESTEL 2) 5 Forces 3) Strategic group mapping
Bargaining power of buyers
1) Relative Concentration 2) Purchase volume as a % of buyer purchases 3) Availability of substitute products 4) Threat of backward integration 5) Switching costs
The Luminarium Corporation has a market capitalization of $100,000,000, and each share is worth $100. How many outstanding shares of Luminarium Corporation are there?
1,000,000
True or false: Formulating a business strategy is a relatively easy task because only a few strategic options are available.
False
True or false: Organizational culture should never change.
False
True or false: Platform businesses are organized as traditional linear pipelines. True false question.
False
What are the three dimensions along which executives formulate corporate strategy?
The degree of vertical integration The type of diversification The geographic scope
Which of the following are characteristics of a perfectly competitive industry?
The industry is fragmented. Individual firms have little or no ability to raise prices. Firms in the industry sell a commodity product.
Which of the following statements about platform businesses is true?
They can grow faster than pipeline businesses.
In terms of productivity, which of the following is true of learning curves?
They go down.
When a manufacturer of computers starts to produce its own computer components, the manufacturer engages in ______ vertical integration.
backward
Amazon's explosive success is largely due to which of the following?
diversification vertical integration
Groupon's initial success was largely due to the company's ______.
first mover advantage
The economic factors that affect a firm's external environment are ______.
largely macroeconomic
In a focused cost-leadership strategy, a firm provides ______.
low-cost products to a niche market
A(n) ______ requires making a choice between a cost position and a value position.
strategic trade-off
Which of the following would provide the best benchmark of a computer firm's performance relative to other high-tech firms?
the NASDAQ computer index
Intensity of Rivalry
> Industry's competitive structure > Industry demand > Industry Maturity > Cost conditions > Exit Barriers
During the shakeout stage of the industry life cycle, profits degrade for ______.
all but the most efficient firms
Which of the following situations would justify the use of manufacturing robots by a producer of packaged foods?
an increase in demand from the market
Managers implement the blueprint of their business model through which of the following?
culture structures processes procedures
The most a consumer is willing to pay for a product is equivalent to the product's ______.
total perceived consumer benefits
A conglomerate fits which type of corporate diversification model?
unrelated diversification
What is an industry
A group of companies offering products or services that are close substitutes for each other (... consider from the customer's perspective - don't just consider products)
The structure, processes, and procedures of an organization are designed, put into place, reviewed, and reworked through a process known as ______.
organizational design
One of the key characteristics of a leveraged buyout (LBO) is that it _______.
changes the ownership structure of a company from public to private
Which of the following are part of culture?
social norms beliefs social mores
Which of the following factors contribute to the existence of high-quality suppliers and complementors in a given industry?
sophisticated customers a high level of competition
Which of the following have significantly more value in their intended use than in their next-best use?
specialized assets
Three Levels of Strategy
•Functional-level strategy •Business-level strategy •Corporate-level strategy
Generic Strategies IIII
•What do these brands do? > Ikea > Trader Joes > Bolt Bus •How do they differ from Cost and Differentiation?
Which of the following is a true statement about the building blocks of an organizational structure?
Hierarchy is one of the building blocks of an organizational structure.
Upper-echelons theory views organizational outcomes as a reflection of the values of the ______.
top management team
For a U.S. company doing business internationally, which of the following would be examples of local responsiveness?
Ikea selling metal chopsticks in South Korea McDonald's selling teriyaki burgers in Japan Walmart selling live animals for food preparation in China
What is licensing?
a long-term contract that enables firms to commercialize intellectual property
Which of the following is an example of the principal-agent problem even when the principal's goal is to create shareholder value?
a manager flying first class on all business trips
Which of the four corporate social responsibilities is considered first and foremost for business enterprises?
economic
Fixed costs are ______ consumer demand.
independent of
MNEs pursuing a multidomestic strategy hope that ______.
local consumers will perceive them to be a domestic company
Most firms consider laggards to be ______.
not worth the effort of pursuing
Which of the following are examples of ways that a large retailing firm can increase the perceived value of its offerings by focusing on customer service?
offering a "no questions asked" return policy maintaining a domestic call center that is open 24 hours per day
A ______ vision statement defines a business by describing the goods or services it produces or offers.
product-oriented
The resource-based view classifies all resources as ______.
tangible or intangible
Simone was the first among her peers to try the new unicorn hair dye. For months she was the only person with unicorn hair. After some time, though, the product became available everywhere, and nearly every other person began sporting unicorn hair, even Simone's mom. This situation describes which of the following?
the crossing-the-chasm framework
A disadvantage of a short-term contract as an alternative on the make-or-buy continuum is that ______.
the supplying firm has little reason to perform transaction-specific investments
Why do incumbent companies enter into strategic alliances with startups?
to hedge against uncertainty
Retaliation
> Incumbents respond to entry with severe actions > Same industry or other > Price cuts, hampering distribution etc.
Quality as Reliability
A product is reliable if it: > Consistently does the job it was designed for > Does the job well > Rarely, if ever, breaks down > Less time is spent of defective products and fixing mistakes > Reliability increases the value a consumer gets from the product and increases the price that the company can charge
Which statement about strategies is true?
A statement of desire on its own often leads to goal conflict.
The ______ is a corporate planning tool in which the corporation is viewed as a portfolio of business units.
Boston Consulting Group (BCG) growth-share matrix
What is one of the benefits of pursuing a differentiation strategy when it comes to the power of suppliers?
Differentiation provides protection against an increase in input prices.
How does an organization's culture influence employee behavior?
Employees are motivated by positive culture because it appeals to their higher ideals.
True or false: The best measure of competitive advantage can be found in the performance of specific departments.
False
When a new firm enters an industry, which of the following often occur?
Incumbent firms lower prices. Industry profit potential declines. Incumbent firms spend more to satisfy customers.
Which of the following statements about platform business is true?
It creates value not only for the businesses but also for consumers.
Which of the following statements about formalization is true?
It is often necessary to achieve consistent and predictable results.
What should a successful vision do for an organization?
It should make employees feel that their work is important. It should inspire employees.
______ describes a situation in which different social and business systems interact with each other.
Social complexity
______ are unique assets with high opportunity cost.
Specialized assets
What conclusions can be reached about the airline industry using the five forces framework?
The mega-airlines must constantly struggle to achieve consistent profitability. The supporting players, such as airports and aircraft suppliers, are quite profitable.
Which of the following are situations in which a resource is considered valuable?
The resource helps the firm increase its economic value creation (V-C). The resource helps a firm exploit an external opportunity.
True or false: Firms can use strategic alliances to strengthen their competitive advantage when competing in battles to control industry standards.
True
True or false: Firms that are supporting an unrelated-diversification strategy through the use of the M-form structure should decentralize decision making.
True
True or false: The shared value creation framework aims to reconcile the concept of gaining and sustaining a competitive advantage with corporate social responsibility. True false question.
True
In ______, a single investor or group of investors buys, with the help of borrowed money, the outstanding shares of a publicly traded company and assumes control of it.
a leveraged buyout
Vasily is a manager at a large snack foods company. Vasily believes his company would benefit from being larger and thinks the shareholders would support such growth. The company is doing relatively well but needs to focus on stabilizing profits and expenditures. Vasily pushes for an acquisition anyway. The reason for this acquisition is ______.
a principal-agent problem
By using a differentiation strategy, a firm aims to ______.
add unique features that will increase the perceived value of a product
Financial statements by public companies must ______.
adhere to generally accepted accounting principles (GAAP) be audited by certified public accountants
Which of the following are examples of sociocultural factors?
an increased demand by consumers for gluten-free products the widespread adoption of smart phones the growth of the Hispanic population
The most rigorous means of analyzing the profit potential within a specific industry is to conduct ______.
an industry analysis
"Time compression diseconomies" refers to the concept that ______.
attempting to get a good outcome in less time tends to be ineffective
What do the best firms in an industry seek to identify and manage on an ongoing basis as sources to respond to their external environment?
core competencies resources capabilities
A company with a ______ vision statement tends to be more flexible and more likely to succeed.
customer-oriented
A ______ strategy aims to create higher value for customers by offering products with unique features but a similar level of costs to those of competing products.
differentiation
A ______ strategy attempts to create products with unique and attractive features in order to increase the price that consumers are willing to pay.
differentiation
It is challenging for firms to "cross the chasm" because ______.
each stage of the industry life cycle features a different group of customers with different preferences and demands
In the maturity stage of the industry life cycle, industry growth ______.
flattens or even declines
The organizational structure element that deals with the degree to which employees are guided by specific, codified rules and processes is known as ______.
formalization
Horizontal integration can ______.
help a firm improve its strategic position in an industry
A firm's unwillingness to alter how things are currently done is known as ______.
inertia
Which of the following characteristics help make an MNE's international strategy successful?
large domestic markets strong reputation prominent brand names
An enterprise that creates value by matching external producers and consumers in a way that creates value for all participants and that depends on the infrastructure that the platform manages is a(n) ______.
platform business
A multinational enterprise would likely be motivated to pursue a global-standardization strategy in order to ______.
take advantage of location economies take advantage of economies of scale
Which of the following are characteristics of a monopolistically competitive industry?
the ability to raise prices for differentiated products a differentiated product obstacles to entry
Which competitive forces can result in erosion of margins for both differentiation and cost-leadership business strategies?
threat of entry power of suppliers power of buyers
Foreign direct investments are investments in ______.
value chain activities abroad
What happens when the markets along the industry value chain are too risky and alternatives too costly in time or money?
vertical market failure
In the strategic management process, which basic principle must be defined first?
vision
Strategy Needs Implementation I
•Executing the intended strategy •Implementation takes •Shared vision •Leadership •Appropriate organizational structure
Cost Leadership Philosophy
•How can an activity be performed differently or even eliminated? •How can a group of linked value activities be regrouped or reordered? •How might coalitions with other firms lower or eliminate costs?
Incentives
> Pay for Performance •Better be sure you measure performance correctly... > Level-up bonuses •Rewards based on team performance, rather than individual > Up or out •Promote or let go > Rank and yank •Bottom performers are fired regularly
Choke Points
> Profit pools show us that all activities and all parts of the value chain are NOT created equally > Some activities are strategically valuable to control, because they affect the distribution of profits > Merck/Medco - Merck's "bad decision" protected pharma industry profits > Choke points used to be more focused on means of production, increasingly moving toward customer -> Those that have the choke points can determine where the profits go
The concept, or framework, of corporate social _________________ guides firms in identifying and addressing their economic, legal, ethical, and philanthropic obligations to society.
Blank 1: responsibility
A(n) __________ group is a set of companies within a specific industry that seek to achieve competitive advantage in similar ways.
Blank 1: strategic
Process innovation
a change in the way a product or service is conceived, manufactured, or disseminated Most important source of competitive advantages > Product innovation vs. process innovation > Incremental vs. radical innovation > Component vs. architectural innovation > Innovation as a journey. EX: Cochlear implant > Each component of the value chain can contribute to increase innovation
Gunther is transferred from the United States to Hong Kong for work. He notices that his colleagues at the new office, most of whom are Hong Kong natives, behave and communicate in a similar manner that is a striking contrast to what Gunther is accustomed to. Gunther is observing his colleagues' ______.
national culture
What are cognitive biases?
obstacles in thinking that result in systematic errors in decision making and hinder rational thinking
Which of the following help determine competitive industry structure?
size and number of competitors firms' degree of pricing power height of entry barriers
Simple structures tend to be used by which group?
small companies with low organizational complexity
The shared value creation framework encourages managers to focus on which of the following needs?
social economic
Leslie, Juan, and Felicia all work for the same company. Leslie pays the bills and invoices customers, Juan makes sure the company's computers and phones work, and Felicia interacts with customers and sellers of the firm's products. This is an example of ______.
specialization
A core competency can help a company achieve which of the following?
to differentiate its products and services to offer products of comparable value at lower cost than rivals can to create higher value for the consumer
A firm that manages to avoid competition entirely by offering a product or service that creates an uncontested market space is engaging in ______.
value innovation
Aspects of Org Structure
•Centralization •Formalization •Complexity
Which approach to strategic decision making takes a larger investment decision and divides it into multiple smaller decisions that happen over time?
a real-options perspective
Calculating cultural distance involves comparing the cultures of which of the following?
a targeted host country a firm's home country
Following the rise of institutional investors, the use of poison pills to avoid hostile takeover has ______.
become rarer
The shared value creation framework is a tool intended to help businesses ______.
benefit all stakeholders, not just shareholders
From the view of a shareholder, the measure of competitive advantage that matters most is return on ______.
risk capital
The intensity with which companies in an industry jockey for market share and profitability is known as ______.
rivalry
The cost advantages that a firm obtains by increasing output, such as by spreading fixed costs over more units, are called economies of
scale
The ______ determines whether to pursue a specific narrow part of the market or to go after the broader market.
scope of competition
Place the four steps of the innovation process in order from first to last.
1. Idea 2. Invention 3. Innovation 4. Imitation
Economic factors
> How sensitive is my company to changes in the economy? > If there is a recession, what happens? > Economic factors can be a determinant for industry factors in the market (If I am a home builder - my business is in trouble during a recession... however, some businesses are countercyclical and are better off during an economic downturn)
Why does the learning curve go down when productivity is considered?
As workers repeatedly engage in an activity, they become more efficient, driving down costs.
When engaging in short-term contracting, a firm sends out __________ __________ __________ to potential companies, which initiate competitive bidding for contracts to be awarded with a short duration.
Blank 1: requests or request Blank 2: for Blank 3: proposals or proposal
______ describes a situation where the cause and effect of a phenomenon are not readily apparent.
Causal ambiguity
Which country experienced rapid economic growth in the early 21st century and now challenges the United States for global economic supremacy?
China
Which of the following pressures opposes local responsiveness on the integration-responsiveness framework?
Cost reductions
Obstacles that determine how easily a firm can enter an industry, are called ______.
entry barriers
Which are the four steps of the innovation process?
idea imitation invention innovation
In the _____ step of the stakeholder impact analysis, firms identify their various social responsibilities to stakeholders.
4th
Stakeholder impact analysis is a _____-step process that allows managers to better understand and address stakeholders' needs.
5
Switching costs
> Threat of switching suppliers > For home users, it is very easy to switch suppliers > corporate /government/big businesses have a more complicated time switching suppliers
Which of the following best defines national competitive advantage?
It is the extent to which a country can compete in international markets.
______ refers to the firms' ownership of its production of needed inputs or of the channels by which it distributes its outputs.
Vertical integration
According to the VRIO framework, to fully exploit the competitive potential of its resources, capabilities, and competencies, a firm must ______.
be organized to capture value
Which of the following are critical aspects of maintaining good relationships between a firm and its stakeholders?
fairness transparency
The Finnish company Nokia was an early industry leader in cell phones. This is an example of ______.
national competitive advantage
When multinationals draw on multiple innovation hubs that all have equal status, they pursue a ______.
polycentric innovation strategy
Threat of backward integration
> ability of buyer industry to become a competitor > Home users can build their own PCs (but this is a niche/hobby) - not a huge threat > government/businesses are less likely to build their own PCs, however data centers used to buy a lot of computers for their data centers, but as they get bigger they are building and designing their own computers. >> EX of a backward integrator: Amazon is not buying Dell computers for Amazon web services, they are building their own and having them manufactured on their own The higher the threat of backward integration, the more bargaining power the buyer has
Which of the following are the three important stakeholder attributes managers must pay particular attention to during stakeholder impact analysis?
legitimacy urgency power
Horizontal integration can reduce ______.
the threat of entry
Which of the following accurately describes the relationship between value and cost that would suggest that firm A has created a competitive advantage over firm B?
(V - C)A > (V - C)B
Susan is a consultant for a grocery store chain that wants to open several new stores in the St. Louis area. She has selected several sites for the company to consider based in part on projected population growth near those sites. What isolating mechanism does this best illustrate?
better expectations of future resource value
How do foreign governments typically influence a firm's use of strategic alliances to enter new markets?
Governments may require that foreign firms have a local joint venture partner in order to conduct business within the country's borders.
Steve Jobs defined and shaped Apple's culture, and his influence continued even after he left the company. This is known as ______.
founder imprinting
Long-term contracts include which of the following forms?
franchising licensing
Larger output allows firms to invest in more specialized systems such as ______.
manufacturing robots enterprise resource planning software
A firm that is organized according to SBUs but also is decentralized in that different geographic locations are fully functional is likely organized in the ______ structure.
matrix
Studies show that CEOs spend the majority of their time ______.
meeting people face-to-face
Which of the following are the four main competitive industry structures?
monopoly oligopoly monopolistic competition perfect competition
Employees who work in organizations that emphasize ethical behavior are ______.
more likely to act ethically.
A company that resists change and sticks to formalized business processes and structures is likely experiencing ______.
organizational inertia
A resource is ______ if the number of firms that possess it is less than the number of firms required to reach a state of perfect competition.
rare
According to the VRIO framework, in order for a firm to gain a temporary competitive advantage, a resource must be at least both ______.
rare and valuable
During the introductory stage of the industry life cycle, innovators will likely devote most of their time, money, and effort to ______.
research and development
______ costs are all of the costs associated with an economic exchange.
Transaction
Which of the following technologies enables a firm to connect its centers of excellence independent of where they are located in the world?
a network structure
When a firm in an oligopoly cuts prices, ______.
a price war is likely to result
What allows firms to manage both strategic alliances and mergers and acquisitions?
a relational capability
A customized strategy that considers the unique resources of the company while considering the external environment creates ______.
a strategic fit between them
Based on its long dominance as a coffeehouse chain, Starbucks has ______.
a sustainable competitive advantage
Which term refers to a company's ability to handle the three specific tasks related to an alliance concurrently and effectively?
alliance management capability
Cost Leadership
> Compete on the basis of a cost advantage and a lowest-price market position These are companies going for low cost leadership. Graphics from Walmart.com, Giantfoodstores.com, BigLots.com, and Greyhound.com.
Which of the following best defines economies of scope?
They are the savings that come from producing two or more outputs at less cost than producing each output individually.
True or false: A company that achieves differentiation parity at a lower cost has implemented a successful cost-leadership strategy.
True
When a firm implements a strategy that leads to superior performance relative to other companies in the same industry, it is said to have achieved ______.
a competitive advantage
Which of the following dimensions make up the triple bottom line?
economic ecological social
Disadvantages of the ______ structure include organizational complexity, increased administrative costs, slow decision making, and difficulty in implementation.
matrix
Which of the following types of control defines expected results in order to guide employee behavior?
output controls
What type of vision statement focuses on the good or service provided?
product-oriented
A firm's organizational structure directly determines which of the following aspects of the firm?
the orchestration of individual and team work efforts the distribution of resources
The functional areas present in a functional structure frequently correspond to which of the following?
stages in the value chain
An agreed-upon solution about a common set of engineering features and design choices is known as a ______.
standard
Which of the following are examples of input controls?
standard operating procedures budgets
Long-term contracts (such as licensing and franchising), equity alliances, and joint ventures are examples of which of the following?
strategic alliances
Which of the following are the three choices in the build-borrow-or-buy framework?
strategic alliances internal development acquisition of new resources
What are two internal governance mechanisms put in place to align principal and agent incentives?
strategic control reward systems
Which of the following are important components of fostering ethical behavior in employees?
strategic goals that are achievable with legal means executive behavior that is in sync with the organization's vision and values board members setting clear ethical expectations
Managers are able to influence which of the following types of external forces?
strategic group composition the structure of their industry
What are autonomous actions?
strategic initiatives that lower-level employees undertake of their own volition, often in response to unanticipated events
Which type of knowledge cannot be codified and can only be gained through active participation in the task?
tacit knowledge
As MNEs compete internationally, a focus on local responsiveness allows them to do which of the following?
tailor product offerings to fit local preferences and requirements
Profit Pools
the total profits earned in an industry at all points along the value chain > Profit pool analysis can be useful to understand the relative profitability of an industry, or activities within a company > What do you want inside your company vs. elsewhere? -> EX Uhaul: Uhaul could build a business that had a few different functional areas (truck rental/box sales) And people focused on the big ticket item, and the supplementary items were worth the cost for the convenience of having one place to return everything... Profit pool analysis of Uhaul show that they have other activities that are high margin and they aren't as high of a base as truck rental, and they were able to get a high return by focusing on the cost of the rental - So - uhaul makes a higher percent of profit from the supplementary goods, because they up-charge for them, and keep the cost of renting the truck appropriate.
Which theory proposes that when faced with decisions, we tend to satisfice rather than optimize?
theory of bounded rationality
The _______ is the idea that products or services available from outside the given industry will come close to meeting the needs of current customers.
threat of substitutes
A firm's attempts to shorten the length of time a process takes, may lead to disappointing outcomes because of ______.
time compression diseconomies
What is the main goal of corporate venture capital investments?
to create real options in terms of gaining access to new technologies
What is the goal of organizational design?
to enable managers to translate their chosen strategy into a realized one
A resource is considered ______ if it helps a firm to deal with an external threat.
valuable
The ______ describes the internal activities a firm engages in when transforming inputs into outputs.
value chain
Which of the following terms best describes an organization's primary objective and what it ultimately wants to accomplish?
vision
______ are the firm's current level of intangible resources.
Resource stocks
A real option gives a firm the right to continue making investments ______.
but does not obligate the firm to do so
In the external analysis phase of the AFI strategy framework, managers should ask,
"How do external forces affect our strategy and competitive advantage?"
Strategy Needs Implementation
"I'd rather have a first-rate execution and a second-rate strategy any time, rather than a brilliant idea and mediocre management." - Jamie Dimon, JPMorgan
Apple
- What do you choose to NOT do? - What can you do that your competitors do not want to do?
In the ______ step of the stakeholder impact analysis the firm identifies their stakeholders' interests and claims according to the power, legitimacy, and urgency framework.
2nd
Start by thinking about who the customers are
Example was Dell (PC industry) Home buyers: >buying a PC to use the internet, installing less software > gaming customers, will have different characteristics but still home buyers corporate/business buyers: > small businesses (no professional IT staff > bigger businesses that do have their own IT staff - both will have a different needs) > government
Technological factors
Example: the impact that the development of the internet has had on businesses > retailers > mobile phone evolution (who would have thought that the phone would threaten the entire taxi industry?... this has all come about as the result of technological changes)
As JetBlue grew, which of the following occurred during the years following 2007?
It suffered a competitive disadvantage.
Multidivisional Structure I
J&J has over 250 companies, grouped into these business units. But, as with the other forms, the more independent, the less value they get from being together. So, you can see how the Core Competence approach, spanning SBUs, is a different way to approach it.
Peter's Pans makes cast-iron cookware. It decides to acquire another similar-sized cast-iron cookware company in the hope that its larger size will enable it to snag some market share away from Iron Maiden, the industry leader. What is Peter's Pans strategy?
Peter's Pans is trying to overcome competitive disadvantage.
Which of the following helped Airbnb develop a successful business in the peer-to-peer rental space?
Presenting a well-designed website Fortuitous timing that led to growing demand Ensuring a smooth transaction between hosts and guests
What is the relationship between fixed costs and economies of scale?
The amount of fixed costs allocated to each unit of output decreases as output increases.
The idea that a corporation is simply a collection of legal contracts is known as ______.
agency theory
To which types of organizations can we apply the principles of strategic management?
all types of organizations
What are the phases of alliance management?
alliance design and governance partner selection and alliance formation post-formation alliance management
A rise in economic growth is reflected by ______. Multiple choice question.
businesses expanding operations to satisfy demand
Which of the following are important sources of entry barriers?
capital requirements economies of scale network effects government policy credible threat of retaliation
The external forces called technological factors ______.
capture the application of knowledge to create new process and products
A disruptive innovation is more likely to be successful if it ______.
captures the low end of the market first
A(n) ______ is a situation in which the stock price of a highly diversified firms is valued as less than the sum of their individual business units.
diversification discount
Demand declines most rapidly in the ______ stage of the industry life cycle.
decline
Motivation that is driven by the employee's interest and the meaning of the work itself is called ______ motivation.
intrinsic
Which of the following were black swan events that occurred in the early 21st century and helped reshape the global economy?
the European debt crisis the European refugee crisis the Global financial crisis
What is System 1 of the brain according to Daniel Kahneman and Amos Tverksy?
the brain's default mode
DaShawn likes to do a lot of research before he buys a new product and relies on the endorsement by others. He also wants to be sure the product will be practical. DaShawn is likely a member of which type of customer?
the early majority
Which of the following are reasons why firms enter into strategic alliances?
to strengthen their competitive position to enter new markets to learn new capabilities
Investors in a company are mostly concerned about the company's ______.
total return to shareholders
Wholesaling is considered a(n) ______ business model.
traditional
With a(n) ______, firms describe how they turn strategy into action.
business model
Value drivers known as ______ add value to a product or service when they are consumed in tandem with the focal product.
complements
A public stock company is considered by law to be an entity with legal rights and obligations. This is known as ______.
legal personality
High-end pen manufacturer Mont Blanc pursues a differentiation strategy pursuing only those who need or want an expensive writing instrument. What scope of competition does this represent?
narrow
Differentiation, Integration, Bureaucratic Costs
•Bureaucratic costs increase with organizational complexity. •More differentiation means more managers. •More integration means more coordination. • •YET, better strategy implementation means better bottom-line performance and profitability.
Example Core Products
•Canon - optics, imaging, microprocessor controls •Honda - engines and power trains •NEC - semiconductors, systems integration •Philips - optical media •Citicorp - financial systems •Core products become the components of other products, and the foundation of the business
Problems with Flat Structures
•Less supervision •Depends more on employee's motivation and control systems •Coordination problems •Agency problems
The second step of the four-step innovation process involves the transformation of an idea into a new product or process and is known as ______.
invention
A producer of consumer headphones that successfully differentiates its products with a patented noise-canceling technology and celebrity endorsements will enjoy which of the following benefits?
less intense competition from imitators the ability to charge a premium price
Rising wages and other costs are likely to negate any benefits MNEs have of access to ______.
low-cost inputs
Gaining new capabilities or competencies is one of the three main reasons companies ______.
make acquisitions
product
matches Choice, electric vehicle electric vehicle
Samira works for a company with a strict top-down structure. Her daily tasks must conform carefully to written guidelines and rules, and she has very specific job responsibilities. Samira works for a(n) ______.
mechanistic organization
Industry-specific factors known as ______ separate one strategic group from another.
mobility barriers
Why Organizational Structure?
•Structural stability - exploit current advantages effectively •Structural flexibility - develop new advantages • •Division of labor - differentiation •Coordination of functions - integration
Availability of substitute products
> substitute supply options for buyers > home internet - there are many, many substitutions (use phone for internet) = a lot of buying power > gaming PCs = less buying power than home internet > small businesses = probably have a lot of substitute options > large businesses = fewer substitute products
______ refers to the idea that a firm is a bundle of resources and capabilities that is unique to the firm.
Resource heterogeneity
Using known components, based on existing technologies, in a new configuration to create a new market is known as ______.
architectural innovation
The organizational structure at Gore, in which everyone is encouraged to speak to anyone they wish to within the organization, is called a(n) ______ organizational form.
boundaryless
Threat of new entrants
> Risk of Entry of Potential Competitors - Economies of Scale > How much does size matter? > Supply side or demand side? - Customer Switching Costs > Brand loyalty or economic? -Capital costs - Incumbency advantages - Distribution Channels - Government regulation - Fear of retaliation
Which of the following statements about the CAGE distance framework is true?
It is designed to aid MNEs in deciding where to compete in the world.
What are the characteristics of a strategic activity system as it applies to firms?
It is socially complex. It consists of interconnected activities. It is causally ambiguous.
Strategic Architecture
Tree structure. This defines, to some degree, how things fit together in the firm, and helps clarify some big decisions. Does a new market opportunity add to being the best in the world at this?
A firm trying to compete with the leading firm in a competitive industry can try to negate the leading firm's competitive advantage through which of the following?
direct imitation substitution
Better expectations of future resource value ______ a firm's competitive advantage.
positively impact
Corporate governance addresses the ______ problem, which underscores the risk of delegating responsibility and control to individuals who may not have the firm's best interests in mind.
principal-agent
Intellectual property protection and social complexity are examples of __________ mechanisms, which help a firm sustain a competitive advantage.
Blank 1: isolating or isolation
Netflix Competencies and Products
Core Competence feeds into the core products, which can then be distributed to the businesses and into end products.
Which of the following are examples of economies of scale?
Having more negotiating power vis-à-vis suppliers Spreading fixed costs over more units
Complements
PC Industry > Software, internet, online services -> All PC value comes from these complements > Peripherals: mouse, keyboard, printer (these are just bonus) -> PC-focused, add value
Vanguard, 1974
Research studied Vanguard 3 different periods of times We see how Vanguard increased its fit over time *Elements that make it hard to compete: -low cost -high quality -direct distribution -mutual structure (all happening at the same time)
Which of the following is a federal regulatory agency whose task it is to oversee stock trading and enforce federal securities laws?
Securities and Exchange Commission
Which term is used for the customer segment in the introductory stage of the industry life cycle?
Technology enthusiasts
As the standard of living rises in emerging economies, MNEs are hoping that ______.
increased purchasing power will enable workers to purchase the products previously made only for export
Benicio's Burritos is a leader in the Mexican fast-food category in the United States. It decides to expand internationally, starting in Japan. Benicio's Burritos fails within a year, learning later that Mexican food is uncommon in Japan and that the flavor profiles are not compatible with Japanese palates. The failure of Benicio's Burritos can be attributed to which of the following?
liability of foreignness
Which of the following structures is divided into several distinct business units, each of which has its own profit-and-loss center?
the multi-divisional structure
What are the two significant issues regarding the CEO pay debate?
the relationship between firm performance and CEO pay the size of the CEO compensation in relation to average employee pay
Which of the following scenarios would result in strengthening a firm's strategic position?
A firm adds a new product feature that greatly increases the perceived value of the product at a minimal cost to the firm.
Which of the following are characteristics of the early majority?
They weigh benefits and costs carefully. They have a strong sense of practicality.
The purpose of a SWOT analysis is to ______.
form a strategy that is tailored to the firm's unique strengths and weaknesses and the opportunities and threats in its environment
The framework for R&D that involves permeable firm boundaries and allows for sharing of ideas and inventions is known as ______.
open innovation
The culture of Zappos is hard to imitate because it consists of numerous, diverse interactions among its employees, processes, procedures, and norms, that create which of the following?
social complexity
What is Dell's industry?
- offer PC's and Servers - consider it the PC industry - However, they have a couple different customers they would consider... home? business? Each will have certain needs met through these products. These different needs will have impacts on who and what are considered rivals
The benefits to be accrued from locating value chain activities in the world's optimal geographies for a specific activity are known as __________ economies.
Blank 1: location or locations
What are the components of post-formation alliance management?
Build inter-firm trust. Establish knowledge-sharing routines. Make relation-specific investments.
To formulate an appropriate business-level strategy, managers must answer the "who-what-why-and-how" questions of competition. Which of the following would be the appropriate questions to answer?
How will we satisfy our customers' needs? Who are the customer segments will we serve? What customer needs will we satisfy?
Which of the following are benefits of a transnational strategy?
It promotes global learning and the diffusion of best practices and innovations. It harnesses economies of scale
Environment Analysis: STEEP
STEEP Analysis: > Sociocultural forces > Technological forces > Economic forces > Environmental forces > Political/Legal/Regulatory forces
Automotive Industry
The automotive industry encompasses many value-chain activities, from the manufacturer of a car to the sale of gasoline to the provision of various financial services. The way that profits and revenues are distributed among these activities varies greatly. The most profitable areas of the car business are not the ones that generate the biggest revenues. EX: Auto leasing business is very high operating margin, with a very narrow share of industry revenue EX: Auto insurance has a relatively high operating margin and a high share of industry revenue EX: Auto rental has a somewhat high operating margin with a narrow share of industry revenue Being a new car dealer is not profitable, except from service revenues > Service repair sector of the auto industry will eventually be (somewhat) moved away from as consumers move to electric cars > EX: used car margin is low, but it does have a high share of industry revenue
True or false: Because the size of organizations is typically positively correlated with prestige, power, and pay, principal-agent problems might be a reason to pursue M&As.
True
True or false: Tesla's high stock market valuation is partly justified by the company's learning curve.
True
How does a company create value
VALUE CHAIN > Support activities > Company Infrastructure: Information Systems Materials Management Human Resources Primary Activities => R&D => Production => Marketing & Sales => Customer Service OUTPUT Value chains do not just exist inside your firm, but also the supplier has a value chain, and the customer may even have a value chain
What does the innovation process begin with?
an idea
Firms have a tendency to change the industry structure in their favor, for example by making industries more __ through mergers and acquisitions.
consolidated
All of the following are sources of strategic initiatives except ______.
consumer demand
According to agency theory, which of the following managerial functions can be used to avoid adverse selection and moral hazard?
control organization
A(n) ______ is a statement of principles to guide an organization as it works to achieve its vision and fulfill its mission.
core values statement
Successfully transitioning from one stage of the industry life cycle to the next is referred to as ______.
crossing the chasm
A partnership in which at least one partner takes partial ownership in the other is a(n) ______.
equity alliance
Everybody can use the basic version of Dropbox for free, but needs to pay for premium services. Dropbox operates on a ______ business model.
freemium
Before World War II, business strategy, implementation, and knowledge typically flowed ______.
from domestic headquarters to outposts abroad
international
functional
A firm must decide whether to build, borrow, or buy to answer the question of ______.
how it will achieve growth
Which of the following are elements of the social dimension of the triple bottom line?
human sustainability achieving work/life balance
Positive adjustments in product features, customer service, and complements may enable managers to ______.
improve the firm's strategic position
In terms of business strategy, blue oceans represent which of the following?
increased demand untapped market space
The relationship between the natural environment and business organizations can best be described as ______.
interdependent
An organization's ______ is what an organization actually does, including the products and services it plans to provide and the markets in which it will compete.
mission
Whereas the firm's strategic position can be considered either differentiated or cost-focused, the scope of competition is considered ______.
narrow or broad
Graciela's used to be the industry leader in restaurant supplies, but over the years competition grew and the company's market share declined. Graciela's has launched several marketing campaigns and introduced new products and services. However not much else in the company has changed, and it still relies on the same team of managers. Graciela's is experiencing ______.
organizational inertia
Hiroshi is considering a job offer from a large pharmaceutical company. At his interview he asks who his boss would be and how jobs and teams are assigned. Hiroshi is asking about the company's ______.
organizational structure
When companies face a highly competitive environment at home, they are more likely to ______.
outperform global competition that lacks such intense domestic competition
When a company offers video-game consoles at a steep discount, but charges customers high fees for games, they are operating on a ______ business model. Multiple choice question.
razor—razor-blade
According to Porter's model, which of the following should be considered when analyzing a firm's competition?
suppliers the threat of substitutes buyers
Core Competence Leads to Core Product
•A core competence can often lead to core products •Core products are easier to understand, because they are tangible
______ resources have physical attributes and are visible.
Tangible
In the ______ step of a stakeholder impact analysis, firms identify those stakeholders that currently have, or potentially can have, a material effect on the company.
1st
______ has a greater chance of arising from intangible resources than from tangible resources.
Competitive advantage
True or false: A competitive advantage is most often maintained indefinitely.
False
The VRIO framework is used to evaluate a firm's resources. VRIO is an acronym for which of the following?
Imitate Rare Valuable
______ suggests that sometimes even random events may have a large impacts on an outcome.
Path dependence
What are the categories of expectations that society has of the business enterprise as described in the CSR framework?
Philanthropic Ethical Economic Legal
______ refers to the assumptions that resources tend to be "sticky" and do not move easily from firm to firm.
Resource immobility
Which of the following are aims of stakeholder strategy?
To manage various stakeholders effectively To gain and sustain competitive advantage
Which of the following questions are part of the five steps in stakeholder impact analysis?
Who are our stakeholders? What opportunities and threats do our stakeholders present? What are our stakeholders' interests and claims?
When a stakeholder has power over a company it is ______.
able to influence the company to do something it would otherwise not do
Which of the following elements comprise strategic management? (Check all that apply.)
analysis implementation formulation
In order to be successful, a firm must have a resource that is valuable, rare, costly to imitate, and the firm must ______.
be organized to capture value
Understanding the cause and effect of a strategy may help managers avoid ______.
causal ambiguity
Which isolating mechanism provides a competitive advantage for a successful company when the source of that company's success is difficult to specify?
causal ambiguity
If a firm's resource is valuable, rare, costly to imitate, and the firm is organized to exploit it, this resource is a ______.
core competency
By definition, resource immobility suggest that resources are ______ to move from firm to firm.
difficult
Resource ______ and resource ______ are the key assumptions behind the resource-based model of the firm.
heterogeneity; immobility
Which of the following can help a firm extend its competitive advantage?
path dependence intellectual property protection better expectations of future resource value
In the resource-based model, ______ is possible if all firms have access to the same resources and capabilities, which means that any competitive advantage acquired by a firm will be brief.
perfect competition
A firm's attempts to manage the web of relationships between internal and external stakeholders in order to create value is known as ______.
stakeholder strategy
Andrew's Home Center has created a unique situation for itself in its industry that allows the company to not only provide excellent value to its customers but also control its costs. This is known as ______.
strategic positioning
Burger Bomb is a new hamburger restaurant. In order to compete successfully against its many competitors, Burger Bomb has decided to focus on quality and an interesting, unique menu that uses locally sourced, organic ingredients. This is known as Burger Bomb's ______.
strategy
In a nutshell, strategy is the art and science of ______. Multiple choice question.
success and failure
What does the concept of resource heterogeneity imply?
that each firm has different resources
Which of the following topics should be considered during the analysis phase of the AFI framework?
the role of strategic leadership and the strategy process the firm's business model and competitive advantages the firm's internal strengths and resources the external environment and associated challenges
Which of the following is not considered an isolating mechanism?
uncertainty about future resource value
True or false: According to the resource-based model, a firm is assumed to be a unique bundle of resources, capabilities, and competencies.
T
The stakeholders of a firm are ______.
individuals or groups that can affect and are affected by the actions of the firm
In which of the following situations can a firm providing goods and services gain a competitive advantage?
Their offerings provide more value for consumers than competitors' offerings. Their offerings are of similar quality to competitors' offerings but can be sold at lower prices due to lower costs.
Competencies and Products II
Core Competence feeds into the core products, which can then be distributed to the businesses and into end products.
True or false: Firms that pursue either related or unrelated diversification generally employ a multidivisional structure.
True
True or false: Innovation can create value for one firm while destroying value for another.
True
True or false: It can be riskier to own parts of the supply chain than to rely on external supply chains.
True
True or false: Multinational enterprises are the driving force behind globalization.
True
True or false: Smart strategic leaders devise ways to make sure that their employees feel invested in the firm's vision.
True
True or false: The functional structure results in difficulty communicating across departments.
True
The ______ is a theoretical model that explains and predicts what resource attributes underpin competitive advantage. It identifies which types of resources are key to firm performance.
VRIO framework
What is the typical result of cognitive limitations?
We choose the option that is "good enough" and satisfies immediate needs.
Which of the following questions are part of the five steps in stakeholder impact analysis?
What are our stakeholders' interests and claims? What opportunities and threats do our stakeholders present? Who are our stakeholders?
Narrowly defining public stock companies in terms of financial performance can lead to ______.
black swan events
A disruptive innovation typically requires a(n) ______ approach to capturing the market.
bottom-up
Multidivisional Structure
> Advantages •Enhanced corporate control by division •Enhanced strategic control of each SBU in portfolio •Growth is easier. New units don't have to be integrated across organization •Stronger pursuit of internal efficiencies. Performance of individual units is readily measurable. > Disadvantages •Establishing the divisional-corporate authority relationship •Distortion of information by divisions •Competition for resources by divisions •Transfer pricing problems between divisions •Short-term research and development focus •Bureaucratic costs
Five forces and complements
> How significant are complements for this industry? > Which of the forces are most significant for the industry? > Which elements within each force are most important? -> Depends on the industry >what is the overall picture?
Customer Responsiveness
> If a customer's need is satisfied better by a certain product, the customer will attribute more value to the product > More value creates a differentiation and ultimately a competitive advantage > Think about a company that is high on customer responsiveness
Political/Legal/Regulatory factors
> Includes taxes, if regulations are getting relaxed, more strict regulations > If regulatory regimes are loosened, it is likely that there will be an increase in competition > Trends of isolationism in the western world -> Anti-trade, anti-immigrant, anti-education > Income inequality as a political issue, not just economic Political EX > Tesla has faced issues with the political environment -> They are environmentally friendly -> They are banned from opening stores in Texas, Maryland, Michigan, Arizona, and West Virginia -> Sponsored by state auto dealers associations -> This is because they sell direct
Purchase volume as a % of buyer purchases
> Lower dependence on you = more buyer power > Is there anybody in Dell's market that spend a very large portion of their spend on computers from Dell? -> probably not too many.
Industry's competitive structure
> Size of competitors, is there a leader? -how many competitors are there? > Do they understand each other? > Are products differentiated or basically identical?
Quality as Excellence
> Superior Quality: Customers perceive attributes of a product to be better than rival's attributes, including: - Design - Style - Aesthetic Appeal - Features & Functions - Level of service that comes with the product > Excellence: When excellence is built into product offering, consumers have to pay more to own or consume the product
Building blocks of competitive Advantage
> Superior efficiency > Superior quality > Superior innovation > Superior customer responsiveness * Operational effectiveness is not strategy, but having advantages in these areas become things that you can build your strategy around.*
Strategic groups
> just as there are boundaries between industries, there are boundaries that define areas inside industries > Purer competitors vs. poorer substitutes
Threat of Substitutes
> not competitors > Ways of substituting industry offerings -> Direct replacement -> Meet needs in a different way ---> reduce usage ---> eliminate usage > Often hard to see substitutes >Switching cost is important --> Cost of switch directly --> Impact of switch on complementary products > Direct substitution with same functionality --> What functionality is required? (EX: neckties and power tools are direct substitutes for each other if the functionality is "i need a fathers day gift for my dad") > Eliminating the need for product (ex if water utility switched to metering) > Reduce product usage -> DMs, texting reduce use of email > Typically comes OUTSIDE the industry
Ecological factors
> was not an important consideration 10-15 years ago > Unexpected changes have made this area a focus > When analyzing the conditions for a firm these areas need to be taken into account if applicable. > EX: spring water in France, if it is contaminated that would not be great for Perrier Water's business > Farming/agricultural sector is very susceptible to ecological factors > EX: Drought in California had severe impact on the food supply chain
Which statement describes the long tail?
A large amount of revenue derived from a small number of units among almost unlimited choices
Which of the following is an example of invention?
Apple combining smart phone and wristwatch technologies to create the Apple Watch
Which of the following are considered resources under the resource-based view of the firm?
Assets Capabilities Competencies
What is a major problem for between 30% and 70% of all strategic alliances?
At least one partner in the alliance considers the venture to be a failure.
Why is employee involvement crucial when developing an inspiring vision and mission?
Because employees may develop helpful strategic initiatives. Because belief in the vision and mission statements motivates employees.
__________ -mover advantage refers to the competitive benefits that accrue to the successful innovator.
Blank 1: First
__________ planning is a strategy-planning activity in which top management envisions various what-if scenarios to anticipate plausible futures in order to derive strategic responses.
Blank 1: Scenario
Another name for producer surplus is __________.
Blank 1: profit
What is important is defined by __________; which attitudes and behavior are deemed appropriate are defined by __________.
Blank 1: values Blank 2: norms
Value
Everything above the cost up to the true benefit that the customer receives Benefit will vary by individual purchaser Requires market research to determine the benefit and therefore how the price should be set If the customer surplus amount increases (customer's satisfaction increases) there are choices for the seller. They can leave the price as-is and ensure the customer is extra satisfied with the purchase, (this could increase word of mouth sales) OR the price could be increased, so that the seller captures more of the value Another way of creating value is by lowering the costs
True or false: A statement such as, "We will be the biggest company in the world," is an example of strategy.
F
Which of the following have helped make globalization possible?
Falling trade barriers Advances in telecommunications Reductions in transportation costs
According to Daniel Kahneman and Amos Tversky, System 1 is analytical, logical, and deliberate.
False
True or false: Firms tend to enter strategic alliances when they have no other choice.
False
True or false: When a user values two products equally, they are negatively correlated.
False
Exit barriers
How hard is it to get out? The harder it is to get out, the more intense the rivalry will be
Business-level strategy addresses which overarching question?
How should we compete?
Which of the following are essential questions that strategic leaders need to consider to increase the probability of entering an industry successfully?
How to enter? Who are the players? What type of entry should be made? When to enter?
GM vs. Toyota in 2003
In 2003: Toyota made average profit of $2,402/car whereas GM made $178 Toyota's better quality: more value to customers, higher price Employee hours per car: 31.06 (Toyota) vs. 40.52 (GM) - lower cost Toyota had better quality cars, and a reputation for having better quality cars which enabled them to charge a higher price. Additionally their production was more efficient Toyota: > Created more value > Had lower cost per unit > Can charge higher prices > Has a lower cost structure
Which country has become a hub for MNEs seeking to outsource business processes such as IT and customer service due to an abundance of highly educated but low-cost labor?
India
What is the relationship between innovation and competitive advantage?
Innovation is a powerful weapon for gaining and maintaining competitive advantage.
Which of the following industries use a subscription model?
Internet providers Magazines Cellphone providers
How does Lyft benefit from its strategic alliances with GM and Waymo?
It allows Lyft to more effectively compete against Uber.
Which of the following is true of tacit knowledge?
It can only be acquired through actively participating in the process.
In addition to the static nature of the PESTEL, Porter's five forces, and strategic group mapping frameworks, what is their other shortcoming?
It does not help us understand why there are performance differences among firms in the same strategic group.
Which of the following statements are true of the network organizational structure?
It enables firms to access communities of practice. It should be supported by uniform, company-wide policies and procedures.
Which of the following statements are true concerning a firm's business model?
It essentially explains how the firm intends to make money. It details the firm's competitive tactics and initiatives. It indicates the way the firm works with buyers and suppliers.
Which of the following are disadvantages of the multidomestic strategy?
It is inefficient. It is costly.
Which of the following statements about a business pipeline is true?
It is the traditional system of horizontal business organization.
How does horizontal integration affect Porter's Five Forces for the surviving firms?
It reduces rivalry among existing firms. It reduces the threat of entry.
Though many benefits exist, which of the following are among the drawbacks of a transnational strategy?
It requires implementing a complex organizational structure. It's difficult to implement.
Which of the following are approaches for answering the question "How to enter?" when a firm is considering entering an industry?
Leverage existing assets Reconfiguring value chains Establishing a niche
Which of the following statements are true about the rival businesses Apple and Microsoft?
Microsoft leveraged its computer operating system to sell other software programs. Apple introduced a series of popular consumer electronic devices.
Which of the following statements about industry dynamics is true?
Over time, industry structures are not stable. The five forces model is a static model.
Which capability is required to create superior product features?
R&D
Which of the following statements is true regarding the relationship between strategy formulation and strategy implementation?
Strategy implementation is at least as important as strategy formulation for success.
Strategy
Strategy is a set of goal-directed actions a firm takes to gain and sustain superior performance relative to competitors
Increasing Customer Responsiveness
Strongly related to the other three building blocks of competitive advantages- > Efficiency, Quality and Innovation • Customer focus vs. product focus • Satisfying customer needs • DON'T ignore other stakeholders > Environment > Communities > Employees, etc.
Why is competitive advantage more likely to spring from intangible rather than tangible assets?
Tangible assets can be bought on the open market.
The Bright Bulb light bulb company produces a line of LED bulbs that customers consider very similar to competitors' LED bulbs. Which of the following conditions must be true for Bright Bulb to have a competitive advantage?
The bulbs must have a lower cost than competitors' bulbs.
Which of the following are characteristics of the companies in a strategic group?
The companies form part of a specific industry. The companies differ in important dimensions from companies in other strategic groups. The companies pursue similar strategies.
To determine a product's producer surplus, which of the following must be compared?
The cost of production The price charged
Baby Buggy Baby sells high-end baby strollers. In an attempt to maintain its competitive advantage, the firm began adding additional features to its strollers. Customers liked these features and sales increased, but the company's profit margins shrank. Which of the following is the likely reason for this?
The firm neglected to control costs.
Which of the following statements is true about a firm's stock price?
The price determines in part the stock's market valuation.
Which of the following statements about stock options is true?
The recipient is given the right to purchase stock at a predetermined price sometime in the future.
Which of the following statements about open innovation is true?
The sharing of ideas and inventions from within the firm and from outside sources can go both ways.
Which of the following statements regarding tasks in the AFI strategy framework is true?
The tasks are very interdependent.
Which of the following statements regarding input controls is true?
They are designed to be considered before employees make any business decisions.
Which statements about joint ventures are true?
They are the least common of the three types of strategic alliances. They involve the sharing of both explicit and tacit knowledge.
Which of the following is true about shareholders of a public company?
They can be individuals or organizations.
Which of the following are ways that powerful suppliers are a threat to firms?
They can reduce the industry's profit potential. They can capture part of the economic value created by firms. They can force the cost of production to increase.
What is a true statement about strategic alliances?
They have a high failure rate.
Which two of the following accurately describe mechanistic organizations?
They have a tall hierarchy. They are highly specialized.
What are common reasons a firm might pursue a merger?
To address principal-agent problems To gain superior acquisition and integration capability To overcome competitive disadvantage
In the Boston Consulting Group growth-share matrix, each of the four categories in the matrix represents ______.
a different investment strategy
Firms that pursue an unrelated diversification strategy and are unable to create additional value tend to experience which of the following?
a diversification discount
In an oligopoly, which of the following conditions exist?
a few large firms differentiated products high barriers to entry
According to the efficient-market hypothesis, information about which of the following is embedded in a stock price?
a firm's current state a firm's past expectations of the firm's future performance
Big companies, such as Apple and Comcast, tend to have ______.
a higher degree of specialization than smaller companies
In addition to having the lowest cost, a low-cost leader is likely to have ______.
a large market share
Which of the following is most likely to produce a radical innovation?
a new sportswear company with a handful of employees that perform a number of loosely defined roles
Which type of company is considered a unicorn?
a private start-up company valued at more than $1 billion
n a subscription-based business model, customers pay for ______.
access to a product or service
Multinational enterprises need an effective global strategy in order to ______.
achieve a competitive advantage against other companies
What are three options used by executives to drive firm growth?
acquisitions organic growth alliances
Pavel works for a successful pharmaceutical company. Despite several years of unprecedented growth, the company wants to boost profits even more. It has taken steps to drastically raise the prices of its most widely distributed medications, which are difficult to imitate. Research into employee ethical decision-making capacity indicates that Pavel will ______.
act in a manner that reflects his company's organizational culture
In team-based environments, the principal may have difficulty determining individual contributions by members. This can create a situation in which an opportunistic employee does little work but takes credit. This is known as ______.
adverse selection
If two firms produce very similar products at the same rate of output, and firm A is able to achieve lower per-unit costs than firm B by taking advantage of a new manufacturing technology, firm A is benefiting from
an experience-curve effect based on process innovation.
A group of companies that deal with more or less the same set of suppliers and buyers make up ______.
an industry
Under a wholesale model, RETAILERS (not the wholesalers) sell goods for ______.
any price they want Wholesalers might sell products to retailers at a fixed price. Retailers, however, are free to set their own price on these products and profit from the difference between their selling price and the cost to buy the product from the wholesaler.
The invention of small desktop copiers to create a new consumer market using the same technology as large, stand-alone copiers is an example of a(n) ______ innovation.
architectural
Economies of scale
are decreases in cost per unit as output increases. For example, the unit cost for a bicycle is less when you can produce 10,000 bicycles per year instead of 500.
Corporate culture is expressed through ______, which are elements such as vocabulary and the type of clothing worn by employees.
artifacts
Teju, like his colleagues, wears jeans and t-shirts to work, and he has a standing desk in an open floor plan. When he and his team reach a project milestone, they celebrate by going to a local karaoke bar. These are all examples of the firm's ______.
artifacts
Which of the following is the most observable element of organizational culture?
artifacts
Which term refers to strategic initiatives that lower-level employees undertake of their own volition, typically in response to unanticipated events?
autonomous actions
The pressures that industry suppliers can exert on an industry's profit potential, is also called the ______.
bargaining power of suppliers
Isolating mechanisms are considered to be ______.
barriers to imitation
Why do many firms fail to successfully implement a blue ocean strategy?
because they end up being "stuck in the middle," unable to increase value and lower costs at the same time
Which of the following are effects that a strong organizational culture can have on employee behavior?
behavior aligns more closely with the firm's strategic goals more effective cooperation stronger commitment, engagement, and effort
Spex is a leading manufacturer of eyeglasses. Spex is based in the United States but opens a facility in a Japanese city known for cutting-edge eyeglass innovations. Spex is counting on which of the following?
benefiting from location economies
location economies
benefits from locating value chain activities in the world's optimal geographies for a specific activity, wherever that may be
A conceptual model that helps strategists choose between seeking internal development, entering into an alliance, or acquiring new resources, capabilities, and competencies is called the "______ framework."
build-borrow-or-buy
A company's goal-directed plans regarding how to compete for advantage is known as the firm's ______.
business-level strategy
The power of ______ is the pressure they can put on the margins of producers in the industry by demanding a lower price or higher product quality.
buyers
Which of the following are ways in which standards can emerge?
by being imposed by government or other agencies through market competition
Which of the following are ways in which the power of buyers affects producers?
by requesting more service by demanding higher quality by obtaining price discounts
Cowgirl Boots, inexpensive leather boots for women, are selling at record-high numbers. The CEO of the company, however, cannot figure out why. Was it caused by the company's recent advertisement campaign or the newly reduced price of the boots or some other unknown factor? Based on this information, what concept describes the CEO's confusion regarding Cowgirl Boots' recent success?
causal ambiguity
A firm might want to use a strategic alliance to ______.
change the industry structure
To get the benefits of vertical integration without the accompanying risks, companies can ______.
choose strategic outsourcing use taper integration
Combining the razor-razor-blade model and the subscription model means that telecom providers make their money through lengthy service plans, which in turn means that it is crucial that they keep their ______ rate, or the proportion of subscribers who leave, down.
churn
Mechanistic organizations tend to have ______.
codified operating procedures
A ______ is a product or service that adds value to the original product offering.
complement
When implementing the razor-razorblade strategy, companies make their profit from ______.
complementary goods
Firms can achieve increased competitive advantage as a result of ______, which are firms that produce a good or service that increases the perceived value of a focal firm's offering when the two are combined.
complementors
When supporting a related-diversification strategy with the M-form organizational structure, managers typically ______.
concentrate decision making at the top of the organization
Optics Incorporated, a publicly traded eyewear business, places profits ahead of all other performance metrics. This practice ______.
conforms to the traditional notion of shareholder capitalism fails to take into account the idea of corporate social responsibility
Achieving competitive advantage means maximizing the difference between which of the following?
consumers' willingness to pay cost to produce the good or service
An important requirement for increasing economic value creation under a differentiation strategy is to ______.
control costs
Which of the following are intangible resources that can be protected as intellectual property?
copyrights trademarks trade secrets
When an established firm makes an equity investment in an entrepreneurial venture it is known as a(n) ______ investment.
corporate venture capital
The firm's accounting profitability, ability to create shareholder value, and ability to generate economic value tend to be ______.
correlated
Which two of the following variables can managers primarily manipulate in order to answer the question, "How should we compete?"
cost value
The goal of a _____________ strategy is to achieve expenses below those of competitors while maintaining similar value. A firm with this strategy could or could not achieve differentiation parity.
cost leadership
Which of the following determine a firm's competitive advantage?
cost position relative to competitors value position relative to competitors
Which of the following are considered the two generic business-level strategies?
cost-leadership differentiation
According to the ______ rule, increasing the surface area (size) of a storage unit or retail facility results in a disproportionate increase in volume (space).
cube square
A firm would use input controls if it wanted to ______.
define and direct employee behavior through a set of explicit, codified rules and standard operating procedures
The specific characteristics of needs in a firm's domestic market, such as customers who hold companies to a high standard of value creation and cost containment, are also called ______.
demand conditions
Which of the following factors helped make Germany, which was a tough environment for a car company, conducive to successful car companies?
demanding customers fierce domestic competition no-speed-limit autobahn
Michael Porter developed the five forces model to help firms do which of the following?
determine the profit potential of different industries gain and sustain a competitive advantage
What method for improving strategic decision making involves having a separate team or individual carefully analyze and critique the underlying assumptions and potential downsides of a proposed course of action?
devil's advocacy
A successful blue ocean strategy requires strategists to reconcile the trade-offs between ______.
differentiation and cost-leadership
Javier, the owner of Javier's Tacos, has noticed that residents of his town are flocking to a new taco truck in increasing numbers. After doing some research, Javier learns that consumers enjoy the food truck because almost all the taco ingredients are locally sourced. Javier decides to add locally sourced ingredients to his menu. This is an example of ______.
direct imitation
A firm experiences ______ when an increase in output results in an increase in costs.
diseconomies of scale
Educational organizations, such as Coursera, offer massive open online courses on the web as an alternative to traditional universities. This is an example of a(n) ______ innovation
disruptive
Which of the following are types of innovation?
disruptive architectural incremental radical
During the first stage of globalization, business functions that took place abroad were limited to which of the following?
distribution sales
Zipster is a local manufacturer of athletic shoes. Zipster has decided it wants to expand to global markets and to offer a larger selection of items. It plans to offer not just athletic shoes but also luggage and car accessories. Zipster is engaging in ______.
diversification
ethical responsibilities matches
do what is right, just, and fair
What are the main types of corporate diversification?
dominant business diversification single business diversification related diversification unrelated diversification
Enterprise Machinists is always improving upon its core competencies by training its machinists constantly so that they are equipped to deal with technological changes and advancements. Based on this information, this is an example of which concept?
dynamic capabilities
What are examples of intangible resource stock a company may have?
dynamic capabilities reputation for quality engineering expertise
Customers who desire a product because it stokes their imagination and creativity are known as ______.
early adopters
Which customer segment dominates the market growth stage of the industry life cycle?
early adopters
According to the crossing-the-chasm framework, the largest difference in consumer expectations is between ______.
early adopters and the early majority
A significant difference between technology enthusiasts and early adopters is that ______.
early adopters are interested in how a new technology will improve their lives, rather than in the details of the technology itself
The ______ is a measure of the change in the amount of goods and services produced by a nation's economy.
economic growth rate
The difference between the cost of producing a product and the price consumers are willing to pay for that product is known as ______.
economic value created
Patti's Potato Chips is a national potato-chip manufacturer. Calpurnia's Crisps is a small-batch gourmet potato-chip maker. Based on just this information, which of the following is the greatest advantage Patti's has over Calpurnia's?
economies of scale
Which of the following are the four underlying strategic management concepts that determine the scope of a firm?
economies of scale transaction costs economies of scope core competencies
When pursuing a differentiation strategy, a firm can achieve a competitive advantage by ______.
ensuring that its economic value exceeds that of its competitors
What is a component of post-formation alliance management?
establishing knowledge-sharing routines
Since expanding internationally, IKEA has shifted focus, concentrating on effectively managing a global supply chain in order to achieve economies of scale. This is reflective of a(n) ______ strategy.
global-standardization
The process of closer integration and exchange between different countries and peoples worldwide, made possible by falling trade and investment barriers, advances in telecommunications, and reductions in transportation costs, is known as ______.
globalization
In the PESTEL model, political factors are those that relate to ______.
government bodies
At which stage of the industry life cycle does the size of the market expand rapidly?
growth
Jennie is the CEO of an information technology company. Based on the data that her researchers have compiled, she feels confident that her strategic plan for the company will be successful in the future, regardless of what happens. Based on this information, it seems that Jennie ______.
has an illusion of control
If the problem with a business strategy results in causal ambiguity, managers will ______.
have a difficult time developing a theory to deal with the problem
Which of the following defines who reports to whom?
hierarchy
Which of the following are frequently associated with organic organizations?
high levels of employee satisfaction greater employee creativity fast decision making
Managers must make strategic trade-offs involving choices between cost and value because ______.
higher value tends to require higher costs
A top-down strategic plan generally takes place in which type of organization?
highly centralized
Which of the following have been found to be ethical norms in business?
honesty fairness reciprocity
Strategy implementation is essentially __.
how a firm performs its work
What are the three aspects of mapping strategic groups?
identifying the most important strategic dimensions choosing two key dimensions for the horizontal and vertical axes graphing the firms in the strategic group and indicating each firm's market share
Which of the following are benefits of a horizontal integration?
increased differentiation reduced competition
Horizontal integration through mergers and acquisitions can create costs. Which of the following are sources of such costs?
increased potential for legal repercussions reduced flexibility
Strategic fit ______ the likelihood that a firm is able to gain a competitive advantage.
increases
With a multidomestic strategy, products are manufactured on a local level. This has the potential of ______.
increasing the risk of intellectual property appropriation
The type of innovation that focuses on improving an existing product by using existing technology and targeting existing markets is a(n) ______ innovation.
incremental
Which type of innovation applies to existing markets and existing technologies?
incremental
The ______ identifies how industries tend to develop and change over time.
industry life cycle
The organizational structure at Gore may be described as ______.
informal and decentralized
Amazon's continued focus on ______ is a key to its ongoing success.
innovation
When a company introduces a new product or process or business model with the intent of gaining a competitive advantage, that company is engaging in ______.
innovation
An auto manufacturer that has access to cheaper labor and raw materials than its rivals will have a competitive advantage regarding lower cost of ______ factors.
input
A firm's culture, brand equity, and intellectual property are examples of ______
intangible resources
Which of the following are examples of resources for a firm?
intellectual property buildings cash
A(n) __________ strategy is the outcome of a rational and structured, top-down strategic plan.
intended
Research about how CEOs spend their days suggests that CEOs spend most of their time ______.
interacting with others
Which of the following are examples of economic factors in the firm's general environment?
interest rates growth rates price stability levels of employment currency exchange rates
In the second step of the stakeholder impact analysis, managers need to identify and understand stakeholders' ______.
interests and claims
Dream Donuts is a very successful business in the United Kingdom. It is contemplating global expansion. Which of the following strategies is Dream Donuts most likely to pursue at these beginning stages of expansion?
international
IKEA offers the same products in every market. This indicates that IKEA has followed a(n) ______ strategy.
international
Mount Mountain is a manufacturer of outdoor gear and apparel. It uses American sizing and standards for its apparel and gear across all markets. Which strategy is Mount Mountain adhering to?
international
A characteristic of a matrix organizational structure is that it ______.
is difficult to implement
Strategic Management
is the integrative management field that combines analysis, formulation, and implementation in the quest for competitive advantage
In the relationship between per-unit cost and output, the minimum efficient scale ______
is where the per-unit cost is lowest
Which of the following factors enabled India to gain a competitive advantage in business process outsourcing?
its low-cost labor its well-educated, English-speaking workforce
The three mechanisms to govern alliances are non-equity alliances, equity alliances, and ______.
joint venture
An example of a recent innovation in process technology is ______.
lean manufacturing
Managers have ______ direct influence over external forces in the firm's general environment than those in the firm's task environment.
less
A benefit of an international strategy is ______.
leveraging core competences
Which of the following forms of agreement do non-equity alliances typically take?
licensing distribution supply
Which of the following tend to result from strong competitive rivalry?
limits to the industry's profit potential
What are sources of value creation in a horizontal integration strategy?
lower costs reduction in competitive intensity
One notable advantage of a multidomestic strategy is ______.
lower exchange-rate exposure
Sustainable competitive advantage exists when a firm ______.
maintains superior performance relative to its industry over a long period of time
process
matches Choice, biotechnology biotechnology
A(n) ______ is when two firms agree to join and create a combined entity, and a(n) ______ is when one firm buys or takes over another firm.
merger; acquisition
Top-down strategy is derived from ______.
military strategy
The main goal of a poison pill is to ______.
minimize the threat of a hostile takeover
After creating a vision as part of the strategic management process, a firm must next establish a(n) ______.
mission
Many firms of all sizes actively compete in the computer hardware industry, and there are no firms with a large market share. Product offerings tend to be similar but are differentiated in ways that enable some firms to raise or impact pricing. The computer hardware industry is an example of ______.
monopolistic competition
The type of structure that is used by experienced firms and consists of distinct, essentially independent strategic business units is the ______ structure.
multidivisional
multidomestic
multidivisional with divisions according to geographic areas; decentralized decision making multidivisional with divisions according to geographic areas; decentralized decision making
global standardization
multidivisional with divisions according to products; centralized decision making
A firm using a(n) ______ strategy is likely to have a multidivisional structure with the multiple divisions representing different geographic areas and decentralized decision making.
multidomestic
The Japanese market is very particular, and MNEs tend to have a challenging time breaking into the market successfully. To provide the most local responsiveness and to influence Japanese consumers in believing that the products are local, an MNE should follow a(n) ______ strategy.
multidomestic
The integration-responsiveness framework suggests that companies facing high pressure for local responsiveness and low pressure for cost reduction should follow a(n) ______ strategy.
multidomestic
What are the four quadrants of the integration-responsiveness framework?
multidomestic strategy international strategy transnational strategy global standardization strategy
A company that deploys resources and capabilities in the procurement, production, and distribution of goods and services in at least two countries is a ______.
multinational enterprise
When a firm does favorably compared to similar firms, it is said to ______.
outperform
When firms tie employee compensation and rewards to predetermined goals, such as a specific sales target, but do not specify the means to those results, they are using ______ controls.
output
The primary difference between outside and inside members of the board of directors is that ______.
outside directors are not employees of the firms, whereas inside directors are
In order to be considered a legal owner of a public company, a person or organization must ______.
own at least one share of the company's stock
When you join the vehicle-sharing company Zoooomm, you are allowed to use a motorized scooter whenever you like, though you do not have to own the machine. You have to pay by the hours of usage. Zoooomm operates on a ______ model.
pay-as-you-go
Tesla has an 80% learning curve, which means that ______.
per-unit cost drops 20% whenever output doubles
Although the five forces model is useful in understanding an industry's profit potential, it provides only a ___.
point-in-time snapshot of a moving target
Rodney is making decisions about his newly formed business. He wants to focus on producing the highest-quality product in the market so he can maximize the product's value to customers. This will cause his product to have higher costs than others already in the market, but Rodney believes customers will pay more for the higher-quality product. Rodney's choice to use a differentiation business-level strategy is determining his company's strategic ______.
position
What are three advantages of equity alliances?
possible emergence of trust and commitment stronger ties a window into new technology (option value)
Which of the following is an important part of strategic leadership and is the strategic leader's ability to influence and direct individuals to do things?
power
New methods for producing existing products or delivering existing services are known as ______.
process innovations
What are the three most important value drivers that managers can use to create a competitive advantage?
product features customer service complements
Innovation can ______.
provide firms with a competitive advantage make existing products or businesses obsolete
A firm that successfully leverages network effects can ___.
push its industry into the growth stage
Which of the following performance dimensions matter in judging the effectiveness of a firm's strategy?
qualitative quantitative
When a country's demand conditions include high-density urban living and high energy costs, consumers can be expected to prefer air conditioners that are which of the following?
quiet small energy-efficient
Because it targeted a new market and used new technologies, the first mass-produced automobile is considered a(n) ______ innovation.
radical
Which of the following are input factors?
raw materials information technology services capital labor
Which of the following contribute to consumer buying power?
real time, accurate price comparisons low switching costs
When a company makes incremental investments as part of a larger investment and takes the time to analyze the information gained following each incremental investment, the company is taking a ______.
real-options perspective
The most significant challenge JetBlue faced in implementing its business strategy was _____.
reconciling the trade-offs between cutting costs and providing superior service
Products in the affordable "business-casual" clothing market have largely become commoditized, and most retailers have begun to compete mainly on price rather than product features. In this environment, it is impossible for one retailer to gain market share without another losing it. This is an example of a ______ ocean.
red
Which of the following are significant threats to a firm pursuing a cost-leadership strategy?
replacement by innovative substitutes competitors adopting similar business strategies value falling below the acceptable threshold
The subjectively determined maximum amount a customer would pay for a product is its ______ price.
reservation
According to the resource-based view of a firm, what are defined as any asset, capability, or competency that a firm can draw upon when formulating and implementing strategy?
resources
Corporate strategy needs to be dynamic over time in order to ______.
respond to the ever-changing external environment diversify to capture growth opportunities keep and maintain a competitive advantage
Which of the following are benefits of a functional structure that also apply to the matrix structure?
responsiveness decentralized focus
If a company fails to change its culture as the firm and environment change, the company's culture can turn into a core ______.
rigidity
Economies of ______ are the savings that come from producing two or more different outputs at a lower cost than producing each output individually.
scope
When pursuing an international strategy, a company ______.
sells the same product in both domestic and foreign markets
The interests of inside directors on the board of directors typically align with those of ______.
senior management
What are the four characteristics of a public stock company that make it an attractive corporate form?
separation of ownership and control limited liability for investors legal personality transferability of investor interests
Benny's Baos had an edge in the market, but other companies began to enter the market. Benny is now losing customers even though he has launched an aggressive marketing campaign in an attempt to attract customers. Benny's Baos is likely in the ______ stage of the industry life cycle.
shakeout
The concept of social complexity suggests that ______.
social and business systems that work for one firm may be hard to imitate because of complex interactions between these systems
The interaction of the many individual systems in the operation of a company often leads to causal ambiguity because of ______.
social complexity
Which of the following is a tool that managers can use to address the needs of stakeholders while maintaining a competitive advantage?
stakeholder impact analysis
The groups or individuals who can impact or be impacted by a firm's actions are known as ______.
stakeholders
The right to buy a company's stock at a predetermined price sometime in the future is known as a(n) ______.
stock option
In order for an alliance to qualify as ______, it must have the potential to alter a company's competitive advantage.
strategic
A voluntary arrangement between firms to share knowledge, resources, and capabilities to develop products, processes, or services is known as a ______.
strategic alliance
A(n) ______ is a voluntary arrangement between firms that involves sharing of resources and capabilities with the intent of developing processes, products, or services.
strategic alliance
Who sets the tone for the ethical climate within an organization?
strategic leaders
Which of the following are three approaches that strategic leaders rely on to formulate and implement strategy?
strategic planning strategy as planned emergence scenario planning
Choosing a business-level strategy helps to define a firm's ______ in a given product market.
strategic position
Which of the following is the least formal approach to setting the strategy process?
strategy as planned emergence
The portion of the strategic management process that concerns the organization, coordination, and integration of work processes is __.
strategy implementation
Which of the following has been called the "graveyard of strategy" due to managers' high rate of failure when attempting it?
strategy implementation
There is a(n) ______ relationship between competitive intensity and the power of the five forces.
strong
The expected competitive intensity is stronger when the other four forces are ______, and weaker when the other four forces are ______.
stronger; weaker
One way that a company can try to avoid problems resulting from diseconomies of scale is to ______.
structure the company into smaller units
The business model used by telecommunication companies when they provide a basic cell phone at no charge when the customer signs a two-year contract is a combination of which of the following types of business models?
subscription razor--razor-blade
The threat of ______ is one of the five forces and can be exemplified by the threat that videoconferencing presents to business travel.
substitutes
If there are several levels of management between the lowest employee and the CEO, the firm has a ______ structure.
tall
Unlike capabilities, resources can be both ______.
tangible and intangible
The partners in non-equity alliances can have weak ties because such alliances are often ______ in nature, which can cause lack of trust and commitment.
temporary
Which of the following are among the primary considerations when determining the mode in which a firm enters a foreign market?
the degree of investment the desired level of control over foreign operations
A firm's organizational structure directly determines which of the following aspects of the firm?
the distribution of resources the orchestration of individual and team work efforts
DaShawn likes to do a lot of research before he buys a new product and relies on the endorsement by others. He also wants to be sure the product will be practical. DaShawn is likely a member of which type of customer? Multiple choice question.
the early majority
The shakeout stage of the industry life cycle is dominated by ______.
the early majority
A company with a cost-leadership strategy faces significant difficulties when ______.
the focus of competition shifts from price to non-price attributes
All other things equal, the greater the cultural distance, ______.
the greater the liability of foreignness
Which of the following are factors that influenced the shift from closed innovation to open innovation?
the growth of venture capital the increasing supply and mobility of skilled workers
Different value drivers contribute to competitive advantage only if ______.
the increase in perceived value exceeds the corresponding cost increase
An industry analysis provides which of the following?
the level of profitability that can be expected for the average firm in the industry a rigorous way of identifying the industry's profit potential insight into a firm's strategic position within an industry
A business model in which companies can obtain a large part of their revenues by selling a small number of units from among almost unlimited choice is referred to as _____.
the long tail
Corporate governance
the mechanisms in place within a company which inspire managers to report the truth in their financial statements
Which of the following helped motivate globalization after the end of World War II?
the need to reconstruct economies damaged by war unfilled needs during the war years
The pressure of rivalry increases when which of the following forces increase in intensity?
the threat of substitutes the power of buyers and suppliers the threat of entry
What is strategic leadership?
the use of influence and power by executives to direct the activities of individuals while pursing an organization's goals
The horizontal connection of the points of each value on the strategy canvas is known as ______.
the value curve
The risk that potential competitors will enter the industry is known as the ______.
threat of entry
Why might a firm create a joint venture when entering a new geographic market?
to adhere to local law to access local contacts to access local expertise
What is the goal of a differentiation strategy?
to create a competitive advantage by offering products or services at a higher perceived value, while keeping costs under control
Which of the following are reasons firms expand internationally?
to gain access to a larger market to gain access to low-cost input factors to develop new competencies
Which are the three main reasons firms make acquisitions?
to gain access to new distribution channels and markets to preempt rivals to gain access to a new capability or competency
Which of the following are common reasons for companies to make foreign direct investments?
to reduce tax burdens to avoid import restrictions to reduce labor costs
Serena is the CEO of an online retailer. She and her immediate staff have decided to implement a company-wide marketing strategy to improve online sales in Central and South America. What type of strategic approach is Serena engaging in?
top-down strategic planning
Which of the following is the term for the costs associated with an economic exchange?
transaction costs
Unlike short-term contracts, long-term contracts encourage firms to make ______ investments.
transaction-specific
A(n) ______ strategy focuses on integration at the business level by attempting to reconcile product differentiations at low cost.
transnational
If an alliance between two firms succeeds, it is likely that the firms in the alliance _____.
trust each other
If parts of a firm's intended strategy fall by the wayside, it is referred to as
unrealized strategy.
What must a firm that pursues a cost-leadership strategy do in order to nurture and constantly upgrade core competencies in manufacturing and logistics?
use a functional structure that has mechanistic organizational elements
A firm's strategic position is determined by the relationship of which two variables?
value creation and cost
A graphical depiction of a firm's relative performance across its industry's factors of competition is known as a(n) ______.
value curve
Implementing a blue ocean strategy requires making competition irrelevant and creating a new market space, otherwise known as ______.
value innovation
Which of the following are the key elements of organizational culture?
values artifacts norms
The relationship between CEO pay and job performance has been shown to be ______.
weak
Which of the following is the most important determinant of economic distance?
wealth and per capita income
merger
when two or more companies join to form a single firm
To formulate an appropriate business-level strategy, managers must answer the ______ questions of competition.
who, what, why, and how
Why Does It Matter to Strategy?
•Aim to be best in the world at your core competence •Helps you define what not to do •If you can dominate that activity, you may gain a choke point > Profit Pools... Canon had 84% market share in desktop laser printer engines. Draw profit pool. (Ink is huge.) This ensured relevance.
Core Competence
•Article published in 1990 •Focuses on some businesses that are still successful, and some that aren't •Is it still relevant? > Not every company has one. > If you have a handful - you're probably not on the right track
Centralization or Decentralization
•Authority patterns in organizations: •Centralized •Decision making retained in the hands of upper-level managers. •Decentralized •Decisions delegated to lower levels in the organization.
Cost Leadership Tactics
•Building efficient scale facilities •Tight control of production costs and overhead •Minimizing costs of sales, R&D and service •State of the art manufacturing facilities •Monitoring costs of activities provided by outsiders •Simplification of processes
Differentation Tactics
•Developing new systems and processes •Shaping perceptions through advertising •Quality focus •Capability in R&D •Maximize Human Resource contributions through low turnover and high motivation
Differentiation Risks
•Does differentiation add enough value for customers? •Cost too high? •Value too low? •Competitor imitation
Centralization
•Easier coordination of organizational activities. •Decisions fitted to broad organizational objectives. •Exercise of strong leadership in crisis. •Faster decision making and response.
Horizontal Differentiation
•Focus is on division and grouping of tasks to meet business objectives -- •Simple structure: •Characteristic of small entrepreneurial companies. •Entrepreneur takes on most managerial roles. •No formal organization arrangements. •Horizontal differentiation is low.
Functional Structure Disadvantages
•Functional orientation creates communication problems. •Performance and profitability measurement problems. •Location versus function problems (coordination). •Strategic problems due to structural (vertical and horizontal) mismatches.
Increasing Efficiency II
•Marketing > Reduce customer defection rate. > Decrease customer acquisition costs > Reduce costs by educating customers •Material Management > Just-in-time(JIT) > Increase account payable cycle > Forming strategic alliances and partnerships
Generic Strategies I
•Michael Porter outlined four generic strategies •What do these brands have in common? How do they go to market? > Walmart > Giant > Big Lots > Greyhound These are companies going for low cost leadership. Graphics from Walmart.com, Giantfoodstores.com, BigLots.com, and Greyhound.com.
Problems with Tall Structures
•Principle of minimum chain of command •Maintaining a hierarchy with the least number of levels of authority needed to achieve a strategy. •Sources of bureaucratic costs: •Too many middle managers •Motivation problems •Coordination problems •Information distortion
Increasing Quality (Excellence)
•Quality as excellence > By emphasizing attributes of the services associated with the product. > Singapore airlines, Volvo (focus on excellence)
Increasing Quality (Reliability)
•Quality as reliability > Total Quality Management (TQM) > Six Sigma •Example -
Increasing Efficiency
•R&D > Example: synthetic molecule screening in biotech industry •Production > Economies of scale: Microsoft Windows Operating System > Specialization: Ford's mass production system (1923). Car price went down from $3,000 to $900. > Learning effects - cost saving that stem from learning by doing > Lean and flexible manufacturing
Decentralization
•Reduced information overload on upper managers. •Increased motivation and accountability throughout organization. •Fewer managers; lower bureaucratic costs.
Example Core Competence
•Sony - ability to miniaturize > Sony created a whole wave of electronic products. The Walkman was a revolution - first true personal music player. •3M - expertise with substrates, coatings, adhesives > 3M - Scotch tape, disk drives, Post-Its, sandpaper •Wal-Mart - logistics, information management •Apple - product design, supply chain, software
Vertical Differentiation
•Span of control (division of authority) •The number of subordinates that a single manager directly manages. •Organizational hierarchy choices •Tall structures •Many organizational levels •Narrow spans of control •Flat structures •Few organizational levels •Wide spans of control
Functional Structure Advantages
•Task grouping facilitates specialization and productivity. •Better monitoring of work processes, reduced costs. •Greater control over organizational activities.
Cost Leadership Risks
•Technological change could take away your advantage •Customers might imitate your processes and value chain •Model T problem: focus on cost misses customer preferences
Differentiation Focus
•These brands are differentiated, and staying in a niche > Mac Mart > VFIS (Volunteer Fire Insurance Services) -> Insurance agency, have agents in all 50 states to serve the unique needs that volunteer firefighters have *untapped market need*
Cost Focus
•These companies are Cost Focus companies - using a low cost strategy, but in a specific niche IKEA has 350k sq ft, 8000 products
Differentiation Characteristics
•Value provided by unique features and value characteristics •Premium prices •High customer service levels •Superior quality •Prestige/status •Innovation
Generic Strategies III
•What do these brands have in common? How do they go to market? > Lexus >Apple > Martha Stewart These are companies using differentiation. Graphics from Martha Stewart, Apple, Lexus
