Business Strategy 495

Identify and briefly explain four of the key characteristics of strategic decisions.

1. Directive; 2 Cross-functional; 3 Integrated (impacts the entire organization); 4 Involve a significant commitment of resources (consequential, high stakes); 5. Not-easily-reversible

For 2021, Stablstock Corporation had earnings per share (EPS) of $2. In 2022, the number of outstanding shares of the company's common stock did not change, and the firm's EPS rose to $2.50. At what rate did the company's net income grow from 2021 to 2022?

25%

The industry standard for inventory turnover is 5.20. What is the turnover ratio of ABC Corporation, and is it better or worse than the industry standard? Use ending Balance Sheet values.

3.94 and is worse than the industry standard.

A firm has a net income of $6,850 and interest expense of $2,130. The tax rate is 34 percent. What is the firm's times interest earned ratio?

5.87

What is the cornerstone of effective strategy evaluation?

Adequate and timely feedback

Which ratio would be considered an activity ratio?

Average collection period

Intangible assets

Balance Sheet

Decisions about which markets to compete refer to

Corporate strategy

Which of the following is often considered to be the first step in strategic planning?

Developing a vision statement

Procter & Gamble's (P&G) sale of many of its brands in order to focus on its core brands is an example of which type of strategy?

Divestiture

Which of the following is the first activity in strategy evaluation?

Examining the underlying bases of current strategies

Which of these examples of a mission statement focus area does NOT identify the utility of the firm's products to its customers?

ExxonMobil focuses on oil and gas rather than energy.

An external audit focuses on identifying and evaluating trends and events within the control of management.

False

Well conceived and properly executed mission and vision statements are not subject to revision.

False

What refers to a strategy of seeking ownership of, or increased control over a firm's competitors?

Horizontal integration

The Du Pont identity can be used to help a financial manager determine: the degree of financial leverage used by a firm the growth potential of the firm the utilization rate of a firm's assets the rate of return on a firm's assets

I, III, and IV

If Chipotle opens five stores for the first time in China, this is an example of which type of strategy?

Market development

Research and development

Notes to the financial statements

Strategy-evaluation activities should ideally be performed

On a continuous basis

Which of the following is NOT a reason for the increasing difficulty of evaluating strategies?

Product life cycles are longer

What is the vertical dimension of industry scope? Evaluate the vertical dimension of the main industry in which your company operates

Refers to the degree in which firms in an industry are vertically integrated along value chain activities

Which of the following is considered a profitability measure?

Return on Assets

According to Porter, what is usually the most powerful of the five competitive forces?

Rivalry among competing firms

Cost to acquire new machinery and equipment

Statement of Cash Flows

within an industry are sets of firms competing in similar ways for similar customers and interacting more directly within each group than with competitors drawn from other strategic groups in the industry.

Strategic groups

How is the Balanced Scorecard used in the strategy process?

The balanced scorecard is a strategy evaluation and control technique. It is based on the need of firms to "balance" financial measures that are oftentimes used exclusively in strategy evaluation with various nonfinancial measures such as product quality and employee morale. An effective Balanced Scorecard contains a carefully chosen combination of strategic and financial objectives tailored to the company's business.

An industry's buyers are most powerful when

They can threaten vertical integration

Activity ratios measure how effectively a firm is using its resources.

True

Dividend decisions concern the percentage of earnings paid to stockholders, the stability of dividends paid over time, and stock repurchase.

True

Evaluating strategies on a continuous rather than on a periodic basis allows benchmarks of progress to be established and more effectively monitored. Correct Answer

True

In most large organizations that engage in strategic management, the formulation, implementation, and evaluation of strategy activities occur at three hierarchical levels: corporate; divisional or strategic business unit; and functional.

True

Laser eye surgery would be considered a substitute product for eyeglasses and contact lenses.

True

Some of the benefits of strategic management are increased discipline, enhanced communication, and more effective allocation of time and resources.

True

Which of these basic questions should a vision statement answer?

What do we want to become?

Under which condition would a differentiation strategy be especially effective?

When technological change is fast paced and competition revolves around rapidly evolving product features

What is an industry?

a branch of an economy that produces a closely related set of raw materials, goods, or services.

The goal of strategic management is to

achieve and maintain competitive advantage.

The purpose of a mission statement is to declare all of these EXCEPT

an annual financial plan.

Explain the resource-based view and its relation to strategic management.

argues that a firm's sustained competitive advantage is based on its valuable, rare, inimitable, and nonsubstitutable resources

In the process of developing a mission statement, it is important to involve

as many managers as possible.

In value chain analysis, the activities of an organization are divided into two major categories of value activities, primary and support. Which of the following is a primary activity?

assembling the product

Inventory of finished goods

balance sheet

All stakeholders' claims on an organization __ pursued with equal emphasis.

cannot be

A good mission statement has

customer orientation

A firm's strengths that cannot be easily matched or imitated by competitors are called

distinctive competencies.

The acronym PESTEL stands for political, economic, sociocultural, technological, , and legal forces.

environment

The ratios that are based on financial statement values and used for comparison purposes are called:

financial ratios

Panera installing online ordering and delivery from their restaurants is an example of which type of strategy?

forward integration

To perform an external audit, a company first must

gather competitive intelligence and information about external trends

The act of oversight and direction for an organization is referred to as

governance

Cost of wages paid to employees

income statement

Whenever new firms can easily enter a particular industry, the intensity of competitiveness among firms tends to

increase

The ________ decision is the allocation and reallocation of capital and resources to projects, products, assets, and divisions of an organization.

investment

The strategic-management process

is a continuous process.

A core competence

is something that a firm does especially well in relation to rival companies

Which strategy seeks to increase market share for present products or services in present markets through greater marketing efforts?

market penetration

Pricing is one of the basic functions of

marketing

Corrective actions are almost always __ except when external and internal factors have not significantly changed and the firm is progressing satisfactorily toward achieving stated objectives. Correct!

needed

A resource is valuable if it is rare, hard to imitate, or

not easily substitutable.

Which of the following is NOT an external force that must be examined in formulating strategies?

organizational

Strategic management focuses on integrating functional areas to achieve organizational success. Which of the following is NOT one of the functional areas that is the focus of strategic management?

organizational behavior

Today, boards of directors are composed mostly of

outsiders

In determining the __, marketers often make decisions related to areas such as warehousing, distribution channels, and retail site locations.

place

In order to appeal to diverse stakeholders, an effective mission statement should be

reconciliatory

What step in the strategic management process involves mobilizing employees and managers to put strategies into action?

strategy implementation

Because of the success of the iPad and the iPhone, Apple has tremendous brand recognition. Brand recognition is one of Apple's

strengths

Internal __ are controllable activities in an organization that are performed especially well.

strengths

If you discover during the course of strategy evaluation that major changes have occurred in the firm's internal strategic position, you should

take corrective actions

Land is an example of a(n) __ resource.

tangible

Since _ resources can more easily be bought and sold, _ resources are often more important for gaining and sustaining competitive advantages.

tangible and intangible

Generally, external opportunities and threats are

uncontrollable by a single organization.

Good mission statements identify the ______ of a firm's products to its customers.

utility

All of the following are basic functions of marketing EXCEPT

value chain analysis.