Strategic Management Chapter 1

Too Fast Inc., a motorcycle company, is the market leader due to its superior engine technology and service orientation. These unique qualities have helped the company generate revenues that are consistently higher than other firms in the same industry. Which of the following can be concluded about Too Fast Inc. from this scenario? - It has a direct investment in other firms. - it has a competitive advantage over the firms - it has an exchange relationship with the other firms - it has a competitive parity with the other firms

it has a competitive advantage over the firms

Which of the following is a stakeholder attribute that managers should consider at every step in a stakeholder impact analysis? - legitimacy - supremacy - literacy - solvency

legitimacy

A competitive disadvantage

occurs when a firm performs below the industry average or is outperformed by its competitors

Value Creation

occurs when companies with a good strategy are able to provide products or services to consumers at a price point that they can afford while keeping their costs in check, thus making a profit at the same time

A firm is likely to have a competitive advantage when it - performs at a level similar to the other firms in the industry. - provides goods similar to those of its competitors, but at a higher price. - provides services that consumers will value more than those of its rivals. - minimizes the difference between value creation and the costs involved.

provides services that consumers will value more than those of its rivals.

Which of the following does a firm possess when it can outperform other firms in the same industry or the industry average over a prolonged period of time? - consistent power position - long-term capital gain - strategic positioning - sustainable competitive advantage

sustainable competitive advantage

A successful business strategy creates ________ for both producers and consumers

value

A good strategy should be able to provide products and services to customers at an attractive price point while maintaining internal costs, resulting in - value creation. - shareholder appreciation. - competitive benchmarking. - sustainable competitive advantage.

value creation.

Corporate Social Responsibility (CSR) has four components:

- economic responsibilities - legal responsibilities - ethical responsibilities - philanthropic responsibilities

Firms should obey all the laws, including but not limited to:

- labor - consumer protection - the environment

The following are elements of the pyramid of corporate social responsibility are required by society

- legal - economic

In the ______ step of the strategy implementation phase of the AFI strategy framework, managers would examine how the firm should be structured in order to implement the desired strategy

- organizational design

The expectations that society has towards business, in contrast to what society requires, result in which of the following elements of the pyramid of CSR?

- philanthropic responsibilities - ethical responsibilities

Stakeholders must pay attention to three important stakeholder attributes:

- power - legitimacy - urgency

Are aims to of stakeholder strategy

- to gain and sustain competitive advantage - to manage various stakeholders effectively

A well-devised strategy is about which two things?

- what to do - what not to do

Effectively managing the strategy process is the result of:

1. Analysis 2. Formulation 3. Implementation These three tasks are the pillars if research and knowledge of strategic management

Stakeholder Impact Analysis

1. Who are our stakeholders? 2. What are our stakeholders' interests and claims? 3. What opportunities and threats do our stakeholders present? 4. What economic, legal, ethical, and philanthropic responsibilities do we have to our stakeholders? 5. What should we do to effectively address the stakeholder concerns?

sustainable competitive advantage

A firm that is able to outperform its competitors or the industry average over a prolonged period of time

Which of the following statements about competitive advantage is NOT true? - A firm will have a sustainable competitive advantage when it outperforms its competitors over a prolonged period of time. - A firm can gain a competitive advantage by providing goods similar to its competitors' goods at a lower price. - A firm's competitive advantage is always absolute, not relative. - A firm's past performance does not guarantee its future performance.

A firm's competitive advantage is always absolute, not relative.

Philanthropic Responsibilities

Be a good corporate citizen. Contribute resources to the community; improve the quality of life.

In the _____ step of the stakeholder impact analysis, managers need to decide the appropriate course of action for the firm in relation to stakeholder concerns

Fifth

Stakeholders impact analysis is a _____ -step process that allows managers to better understand and address stakeholders' needs

Five-step process

What is the overall purpose of strategic management?

Gain competitive advantage

Global Strategy

How and where should the firm compete: local, regional, national, or international?

Business Strategy

How should the firm compete: cost leadership, differentiation, or value innovation?

The question "How do we implement the formulated strategy through an organizational structure, culture, and control system that values and encourages ethical behavior?"

Implementation phase

________ is an important tool because it allows a manager to recognize, prioritize and address the needs of various stakeholders. - Stockholder appreciation - Shareholder voting proxies - Stakeholder impact analysis - Shareholder Right's Plan

Stakeholder impact analysis

What are our stakeholders' interests and claims? Step 2: Identify Stakeholders' Interests

Strategic leaders ask, "What are our stakeholders' interest and claims?" They need to specify and assess the interests and claims of the pertinent stakeholders using the power, legitimacy, and urgency criteria.

What economic, legal, ethical, and philanthropic responsibilities do we have to our stakeholders? Step 4: Identify Social Responsibilities

Strategic leaders ask, "What economic, legal, ethical and philanthropic responsibilities do we have to our stakeholders?"

What opportunities and threats do our stakeholders present? Step 3: Identify opportunities and threats

Strategic leaders ask, "What opportunities and threats do our stakeholders present?"

Who are our stakeholders? Step 1: Identify stakeholders

Strategic leaders ask, "Who are our stakeholders?" The strategic leaders focus on stakeholders that currently have, or potentially can have, a material effect on a company. Identifies the most powerful internal and external stakeholders as well as their needs

What should we do to effectively address the stakeholder concerns? Step 5: Address Stakeholders Concerns

The firm asks, "What should we do to effectively address any stakeholders concerns?" In the last step in stakeholder impact analysis, strategic leaders need to decide the appropriate course of action for the firm, given all of the preceding factors. Thinking about the attributes of power, legitimacy, and urgency helps to prioritize the legitimate claims and to address them accordingly.

Which of the following statements will effectively guide a strategist?- It is necessary to isolate the key stakeholders and their needs when formulating a strategy. - Industry and firm effects that determine firm performance are independent of each other. - Strategy is all about competitive benchmarking and operational effectiveness. - The principles of strategic management can be applied universally to all organizations.

The principles of strategic management can be applied universally to all organizations.

a set of coherent actions to implement a firm's guiding policy

This element is accomplished through strategy implementation

Benchmark

To compare something against a standard, such as an activity looked at in an audit that is compared against a HIPAA standard.

Ethical Responsibilities

do what is right, just and fair

Which of the four corporate social responsibilities is considered first and foremost for business enterprises?

economic

Internal Stakeholders

employees, stakeholders, board of directors

Strategic Management

enables you to think like a general manager to help position your organization for superior performance

The greater the difference between value creation and cost, the - less likely a firm will gain competitive advantage. - greater a firm's economic contribution. - greater a firm's competitive parity. - less likely that a firm's strategic position will be competitive.

greater a firm's economic contribution.

Which of the following statements is true of strategy? - Tactical tools that are a part of a firm's functional and global initiatives are strategy. - Operational effectiveness and competitive benchmarking are strategies. - Actions that allow a firm to address a competitive challenge are strategy.

Actions that allow a firm to address a competitive challenge are strategy.

AFI

Analyze, Formulate, Implementation

Internet privacy, genetic engineering and stem cell research are examples of area's in which firm's ______ responsibilities exceed its legal responsibilities

ethical

Which of the following is a philanthropic responsibility of a firm?- not infringing on other firms' patents - providing products at appropriate prices - exhibiting corporate citizenship - obeying government regulations - not infringing on other firms' patents

exhibiting corporate citizenship

Gadgets n' Stuff Inc. is a vendor who supplies machine parts to an appliance manufacturing company. In return, Gadgets n' Stuff Inc. relies on the company for its revenue and is affected by any decisions taken by the company. In this scenario, Widgets Inc. is a(n) _________ for the appliance manufacturing company. - external stakeholder - focus group - representative sample - internal stakeholder

external stakeholder

economic responsibilities

gain and sustain competitive advantage

To gain a competitive advantage, a firm needs to provide either

goods or services consumers value more highly than those of its competitors, or goods or services similar to the competitors' at lower cost

effective stakeholder management

helps a firm build a strong reputation

AFI are

highly interdependent and frequently occur simultaneously

competitive advantage

if a firm underperforms its rivals or the industry average

Employee stock ownership plans (ESOPs)

incentive workers by offering them with discounted shares or retirement plans based on company stock

Power: Shareholder activists have more power over firms than

individual investors do

The stakeholders of a firm are ________

individuals or groups that can affect and are affected by the actions of the firm

Strategy

is a set of goal-directed actions a firms takes to gain and sustain performance relative to competitors

Stakeholder strategy

is an integrative approach to managing a diverse set of stakeholders effectively in order to gain and sustain competitive advantage

Strategic Management

is the integrative management field that combines analysis, formulation, and implementation in the quest for competitive advantage.

Legal Responsibilities

laws and regulations are society's codified ethics, embodying notions of right and wrong. They also establish the rules of the game

legal responsibilities

laws and regulations are society's codified ethics; define minimum acceptable standard

The third step of stakeholder impact analysis requires managers to identify the ________ presented by internal and external stakeholders

opportunities and threats

Competitive parity

performance of two or more firms at the same level

Strategic positioning allows managers to

provide customers value while controlling costs

Economic Responsibilities

The business enterprise is first and foremost an economic institution.

Why are black swan events such as accounting scandals and the global financial crisis perceived as caused by cheap credit and subprime mortgages offered by financial institutions, bad for business? -They allow companies to gain a competitive advantage unfairly. - They erode the implicit trust between the corporate world and society. - They contribute to competitive parity, which hinders economic growth. - They foster a false sense of prosperity, which results in an economic depression.

They erode the implicit trust between the corporate world and society.

a diagnosis of the competitive challenge.

This element is accomplished through analysis of the firm's external and internal environment.

a guiding policy to address the competitive challenge

This element is accomplished through strategy formulation, resulting in the firm's corporate, business, and functional strategies

Corporate Strategy

Where should the firm compete: industry, markets, and geography?

Which of the following statements related to a firm's stakeholders is not true? - While external stakeholders are those who make contributions toward the firm, internal stakeholders are those who reap all the benefits. - If internal or external stakeholders withhold participation in the firm's exchange relationships, it can have severe negative performance implications. - A firm's stakeholders include organizations and groups along with individuals who can affect or be affected by the firm's actions. - Effective stakeholder management is an example of how managers can act to enhance a firm's competitive advantage.

While external stakeholders are those who make contributions toward the firm, internal stakeholders are those who reap all the benefits.

competitive advantage

a firm that achieves superior performance relative to other competitors in the same industry average

Ethical Responsibilities

a firm's ethical responsibilities, go beyond its legal responsibilities. They embody the full scope of expectations, norms, and values of its stakeholders. Strategic leaders are called upon to what society deems just and fair.

Corporate Social Responsibility (CSR)

a frame work that helps firms recognize and address the economic, legal, social and philanthropic expectations that society has of the business enterprise at a given point in time

When a stakeholders has power over a company it is ______

able to influence the company to do something it would otherwise not do

To which types of organizations can we apply the principles of strategic management?

all types of organization

Stakeholders strategy

an integrative approach to managing a diverse set of stakeholders effectively in order to gain and sustain competitive advantage, (internal and external stake holders)

philanthropic responsibilities

corporate citizenship

When identifying stakeholders, a firm should focus on those stakeholders that ________

currently have, or could potentially have, a material effect on the firm

External Stakeholders

customers, suppliers, alliance partners, creditors, unions, communities, governments, media

AFI: Formulation (F)

- Business Strategy - Corporate Strategy - Global Strategy

Among the various types of responsibilities a business firm has, which are specifically considered to be economic responsibilities?

- Investors: expect an adequate return for their capital - Creditors: expect the firm to repay its debts - Consumers: expect safe products and services at appropriate prices and quality - Suppliers: expect to be paid in full and on time - Government: expect the firm to pay taxes and manage natural resources with stewardship

AFI: Implementation

- Organizational Design - Corporate Governance and Business Ethics

AFI: Analysis

- Strategic Leadership and the Strategy Process - External Analysis - Internal Analysis - Competitive Advantage, Firm Performance, and Business Models

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

The following are legal documents that allow business to function as an institution:

- contract enforcement - property rights

EatNow is a fast-food restaurant that has recently entered the hospitality industry. Since most of its competitors are pursuing a low-cost position and doing well, EatNow also wants to adopt the same strategy. Which of the following will be a likely implication of this decision? - EatNow will face low-profit potential. - EatNow will be able to create higher value for its customers. - EatNow will be better placed to gain a competitive advantage in the industry. - EatNow will not face any direct competition in the industry.

EatNow will face low-profit potential.

Good Strategy

Enables a form to achieve superior performance and sustainable competitive advantage relative to its competitors. It is based on a strategic management process that consists of three elements: 1. a diagnosis of the competitive challenge. 2. a guiding policy to address the competitive challenge 3. a set of coherent actions to implement a firm's guiding policy

Corporate citizenship (philanthropic)

reflecting the notion of voluntarily giving back to society

Which of the following has contributed to Tesla's competitive advantage in terms of stock appreciation? - copying the most popular features of competitors' vehicles - reinvesting profits to continually design and produce better electric vehicles - keeping its proprietary technologies secret - using inexpensive materials to keep costs low

reinvesting profits to continually design and produce better electric vehicles

The annual net profit after taxes for Tele Corp., a multinational conglomerate, is $5.5 billion. As legal owners, which of the following stakeholder groups has the most legitimate claim on this profit? - managers - shareholders - local communities - government

shareholders

Effective guiding policy is supported by and stays consistent through the use of __________

strategic commitments

The field of management that focuses on attaining competitive advantage by combining analysis, formulation and implementation is known as

strategic management

Strategy is the art and science of _______

success and failure

Strategy is about delivering

superior value, while containing the cost to create it, or by offering similar value at lower cost.

Which of the following groups will not be considered a company's internal stakeholder? - suppliers - board members - shareholders - managers

suppliers

Stakeholder strategy allows firms

to analyze and manage how various external and internal stakeholders interact to jointly create and trade value

Managers often have to make decisions between two conflicting strategic options, otherwise known as

trade-offs

When a firm integrates the competitive strategies of cost -leadership and differentiation, it will most likely result in - competitive advantage through superior performance. - trade-offs that work against each other. - an increase in the firm's economic contribution. - competitive parity with firms that have adopted either of the strategies.

trade-offs that work against each other

In which of the following cases was a company at a major competitive disadvantage? - Facebook hired Sheryl Sandberg because Mark Zuckerberg, Facebook's founder, lacked important business skills. - Without a clear strategic position, Sears tried to be too many things for too many types of customers. - Sam's Club decided to prescreen its customers via required membership to establish creditworthiness. - Strategy executives at UPS used scenario planning to identify issues critical to shaping the firm's future.

Without a clear strategic position, Sears tried to be too many things for too many types of customers.

Analysis, Formulation, Implementation (AFI) Strategy Framework

a model that links three interdependent strategic management tasks - analyze, formulate and implement - that together, help managers plan and implement a strategy that can improve performance and result in competitive advantage

A diagnosis of the competitive challenge, an element of a good strategy, is primarily accomplished through strategy - implementation - formulation - analysis - control

analysis

Which of the following groups is most likely to be considered a firm's internal stakeholder? - creditors - customers - alliance partners - board members

board members

How has Walmart staked out a unique strategic position? - by paying high wages to attract the most talented employees - by providing excellent customer service in a luxury setting - by cutting costs to offer lower prices than competitors - by investing 100% of profits in community development programs

by cutting costs to offer lower prices than competitors

Firms should identify a _______ so that employees can determine if they are making progress in addressing it.

clear competitive challenge