BUSA 6600 (Chapter 1)
Which of the following basic elements comprise a company's profit formula?
C the competitive strength of the company; S the sustainable competitive advantage potential; and V the value provided for the customer P the price charged to customers; C the company's costs; and M the company's market share V the value provided for customers; P the price charged to customers; and C the company's costs [Correct] M the company's market share; C the competitive strength of the company; and S sustainable competitive advantage potential S the sustainable competitive advantage potential; V the value provided for customers; and C the company's costs [Exp: The customer value proposition can be expressed as V—P, which is essentially the customers' perception of how much value they are getting for the money. The profit formula, on a per-unit basis, can be expressed as P—C.]
When can a company achieve sustainable competitive advantage?
Whenever it possesses the most profitable business model in the industry and can satisfy shareholder expectations better than its competitors. When it consistently achieves both its long-term and short-term strategic and financial objectives. When it is able to produce better products for fewer costs than its rivals. When elements of the strategy give buyers lasting reasons to prefer a company's products or services over those of competitors. [Correct] If it can translate its vision, mission, and values into a well-crafted strategy. [Exp: A company achieves sustainable competitive advantage when it gives its buyers lasting reasons to prefer its products or services over those of competitors—reasons that competitors are unable to nullify or overcome despite their best efforts.]
Unanticipated developments and fresh market conditions require a[n]
customer-oriented strategy. emergent strategy. [Correct] proactive strategy. market-driven strategy. deliberate strategy.
Which of the following is NOT a condition that would lead managers to drastically modify the company's strategy?
employee demands for better working conditions (Correct) changing market conditions advancing technology shifting buyer needs mounting evidence that the strategy is not working well (Exp: The lead managers of every company must be willing and ready to modify the strategy in response to changing market conditions, advancing technology, unexpected moves by competitors, shifting buyer needs, emerging market opportunities, and new ideas for improving the strategy.)
Which of the following is NOT a frequently used and dependable strategic approach to setting a company apart from rivals, building strong customer loyalty, and winning a competitive advantage?
focusing on a narrow market niche within an industry striving to be the industry's low-cost provider, thereby aiming for a cost-based competitive advantage over rivals outcompeting rivals on the basis of differentiating features, such as higher quality, wider product selection, added performance, value-added services, more attractive styling, and technological superiority mimicking the strategies of the industry leaders to gain a strong market position [Correct] developing an advantage based on offering more value for the money [Exp: Every company's strategy needs to have some distinctive and unconventional element that draws in customers and produces a competitive edge. Mimicking the strategies of successful industry rivals when not aligned to a strategy rarely works.]
A company's strategy is shaped
partly by management analysis and choice, and partly by the necessity of adapting. (Correct) by its capital reserves and future growth potential. by the market environment and the competitive pressure created by the rivalry within the industry. by its core values, mission, and strategic vision. by its resources, capabilities, competitiveness, and market position. (Exp: A company's strategy is shaped partly by management analysis and choice, and partly by the necessity of adapting and learning by doing. A company's realized strategy comprises planned initiatives to improve the company's financial performance and secure a competitive edge in combination with initiatives to deal with unanticipated developments and fresh market conditions.)
Why does a company's strategy tend to be a "work in progress" and evolve over time?
because the competitive advantage potential of developing a new strategy changes annually because the change in the company's vision and values cause a constant adaptation of the strategy, with the ongoing need to imitate new strategic moves by the industry leaders because of changing circumstances and ongoing management efforts to improve the strategy [Correct] due to the changing nature of employee skills and capabilities because of the ongoing need to imitate the strategic moves of the industry's strongest rival [Exp: Changing circumstances and ongoing management efforts to improve the strategy cause a company's strategy to evolve over time—a condition that makes the task of crafting strategy a work in progress, not a one-time event.]
Which of the following statements about strategies is NOT correct?
A strategy provides direction and guidance, in terms of not only what the company should do but also what it should not do. A strategy is an action plan for outperforming its competitors and achieving superior profitability. Making the wrong strategic moves will prove a distraction and a waste of company resources. A strategy is the actions taken to gain sales and market share irrespective of product prices and costs. (Correct) A strategy represents a managerial commitment to an integrated array of considered choices about how to compete. (Exp: Strategy is about competing differently from rivals—doing what competitors don't do or doing what they can't do. Companies compete on dimensions like quality, cost, services, locations, and customers. Sometimes companies enter strategic alliances and collaborative partnerships to strengthen their market position and competitiveness.
Which of the following is NOT true of a company's business model?
It is management's blueprint for delivering a valuable product or service to customers in a manner that will generate revenues sufficient to cover costs and yield an attractive profit. It is management's storyline for how the strategy will be a moneymaker. It consists of two crucial elements: (1) its customer value proposition and (2) its profit formula. It reflects how efficiently a company can meet customer wants and needs even at the cost of incurring loss. [Correct] It sets forth the logic for how its strategy will create value for customers, while at the same time generates revenues sufficient to cover costs and realize a profit. (Exp: A company's business model sets forth the logic for how its strategy will create value for customers and at the same time generate revenues sufficient to cover costs and realize a profit.)
Which of the following statements does NOT accurately describe a sustainable competitive advantage?
What makes a competitive advantage sustainable are elements of the strategy that give buyers lasting reasons that competitors are unable to nullify or overcome despite their best efforts. The bigger and more sustainable the competitive advantage, the better are a company's prospects for winning in the marketplace and earning superior long-term profits relative to its rivals. The advantage is sustainable if it persists despite the best efforts of competitors to match or surpass this advantage. If a company once achieved a sustainable competitive advantage due to experience, know-how, and specialized capabilities, it is nearly impossible for competitors to imitate and eliminate this advantage. [Correct] If a company's competitive edge holds promise for being sustainable (as opposed to just temporary), then so much the better for both the strategy and the company's future profitability. [Exp: Attracting and pleasing customers through cost, quality, and brand image of a product is one of the "hows" to be considered while devising strategies that are dynamic, unique, and provide sustainable edge over competitors. A company achieves a sustainable competitive advantage whenever it has some type of edge over rivals in attracting buyers and coping with competitive forces. Strategy, at its essence, is about competing differently—doing what rival firms don't do or what rival firms can't do.]
Which is NOT a hallmark of a cleverly crafted and well-executed strategy?
a strategy that produces enduringly good performance a strategy that provides direction only in terms of what the company should do Correct a strategy that can withstand the competitive challenges from rival firms a strategy that is adaptable to changing business and market conditions a strategy that facilitates the capture of emerging opportunities (Exp: The objective of a well-crafted strategy is not merely temporary competitive success and profits in the short run, but rather the sort of lasting success that can support growth and secure the company's future over the long term.)
The fit test, which a company's strategy has to pass in order to be qualified as a winning strategy, includes
a superior performance for more than a brief period of time. profitability, shareholder value creation, and financial strength. competitive strength and market standing. close and effective alignment with the company's situation even as external and internal conditions change. [Correct] competitive strength and superior performance. [Exp: To qualify as a winner, a strategy has to be well matched to industry and competitive conditions, a company's best market opportunities, and other pertinent aspects of the business environment in which the company operates.]
The heart and soul of a company's strategy-making effort
deals with how management plans to operate in a socially responsible manner, while keeping the company's prices as low as possible. is figuring out how to become the industry's best-cost provider. concerns how to improve the efficiency of business operations. is figuring out how to develop a winning customer value proposition and profit formula. is the actions and moves in the marketplace that managers take to gain a competitive advantage over rivals.[ Correct] [Exp: The heart and soul of any strategy is the actions and moves taken by the managers in the marketplace to gain a competitive advantage over rivals. A company achieves a competitive advantage whenever it has some type of edge over rivals in attracting buyers and coping with competitive forces.]
Types of actions and approaches that often characterize a company's strategy do NOT include actions to
enter new product or geographic markets or to exit existing ones. upgrade, build, or acquire competitively important resources and capabilities. strengthen market standing and competitiveness by acquiring or merging with other companies. capture emerging market opportunities and defend against external threats to the company's business prospects. improve ethical standards, ensure employees' commitment, and continuously develop new talents. [correct] (Exp: Actions and approaches that characterize a company's strategy do not include actions to improve ethical standards, ensure employees' commitment, and continuously develop new talents.)
Competing in the marketplace on the basis of a competitive advantage
involves either giving buyers what they perceive as superior value compared to the offerings of rival sellers or giving buyers the same value as others at a lower cost to the firm. Correct gives buyers an immediate preference for a company's products or services over those of competitors and enables the company to dominate its competitors. means that a company has to offer the lowest price for differentiated goods that at least match the feature and performance of higher-priced rival brands. provides the basis for a longer, sustainable growth. deals with how management plans to maximize profits while, at the same time, operating in a socially responsible manner that keeps the company's prices as low as possible. [Exp: There are many routes to competitive advantage, but they all involve either giving buyers what they perceive as superior value compared to the offerings of rival sellers or giving buyers the same value as others at a lower cost to the firm.]
A company's strategy
is mainly affected by a reactive approach since uncertainty is high. is mostly proactive and consists of strategy elements that are both planned and realized as planned. tends to be a combination of both proactive and reactive elements, with certain elements being abandoned because they have become obsolete or ineffective. [Correct] generally consists of new strategy elements and strategic moves that emerge as changing conditions warrant. consists of initial and developing approaches aiming to ensure long-term growth. (Exp: The evolving nature of a company's strategy means that the typical company strategy is a blend of (1) proactive, planned initiatives to improve the company's financial performance and secure a competitive edge and (2) reactive responses to unanticipated developments and fresh market conditions.
The combination of a good strategy and good strategy executi
provides long-term growth for the company. signals the company's superiority in the industry. is the most telling sign of good management. (Correct) is the sign for achieving a sustainable competitive advantage. enables the company to become the industry leader. (Exp: A company's performance is directly attributable to the caliber of its strategy and the proficiency with which the strategy is executed.
A strategy consists of
the competitive moves and business approaches that managers are employing to achieve superior profitability. (Correct) the company's aspirations for the future, its vision, purpose, and present business approaches that differentiate the company from its competitors and create a competitive advantage. the beliefs, traits, and behavioral norms that company personnel are expected to display and execute in daily business operations. the actions and moves taken by the managers to please and attract the customers without much consideration to rival strategies. the offensive moves a company is employing to make its product offering more distinctive and appealing to buyers, and that offers a higher margin for the company. (Exp: A company?s strategy is the set of actions that its managers take to outperform the company?s competitors and achieve superior profitability.)
Which of the following are among the tests a winning strategy must pass?
the fit test and the performance test (Correct) the competitive advantage test and the profitability test the ethical standard test and the fit test the fit test and the profitability test the performance test and the cost-advantage test (Exp: A winning strategy must pass three tests: the fit test, the competitive advantage test, and the performance test.)
Why is a strategy important?
to do what competitors don't do or, even better, doing what they can't do (Correct) to know what the company should do, not what it should not do to match rival businesses' products and quality dimensions in the marketplace to build profits for short-term success to balance the interests of stakeholders and shareholders (Exp: Strategy is about competing differently—doing what rival firms don't do or what rival firms can't do. Strategy is about competing differently than rivals do and building competencies and resource capabilities that are not readily matched).