INTG BUS POLICY

A strategy is good when it enables a firm to achieve superior performance. It consists of what three elements:

1) Diagnosis of the competitive challenge 2) A guiding policy to address the competitive challenge 3) A set of coherent actions to implement the firms guiding policy

What goes into formulation?

1. Corporate strategy 2. Business strategy 3. Functional strategy

What 3 things is strategy not?

1. Grandiose statements are not strategy 2. A failure to face a competitive challenge is not strategy 3. Operational effectiveness, competitive benchmarking, or other tactical tools are not strategy.

What is the problem with grandiose statements?

1. They often lead to goal conflict and confusion 2. They fail to address economic fundamentals

What goes into analysis?

1. Vision, mission, and values 2. External analysis 3. Internal analysis

upper-echelons theory

A conceptual framework that views organizational outcomes—strategic choices and performance levels—as reflections of the values of the members of the top management team.

competitive advantage

A firm that achieves superior performance relative to other firms in the same industry

dynamic capabilities

A firm's ability to create, deploy, modify, reconfigure, upgrade, or leverage its resources in its quest for competitive advantage.

core rigidity

A former core competency that turned into a liability because the firm failed to hone, refine, and upgrade the competency as the environment changed.

PESTEL model

A framework that categorizes and analyzes an important set of external factors (political, economic, sociocultural, technological, ecological, and legal) that might impinge upon a firm. These factors can create both opportunities and threats for the firm.

Industry Analysis

A method to (1) identify an industry's profit potential and (2) derive implications for a firm's strategic position within an industry.

resource-based view

A model that sees certain types of resources as key to superior firm performance.

social complexity

A situation in which different social and business systems interact with one another.

casual ambiguity

A situation in which the cause and effect of a phenomenon are not readily apparent.

path dependence

A situation in which the options one faces in the current situation are limited by decisions made in the past.

Strategic intent

A stretch goal that pervades the organization with a sense of winning, which it aims to achieve by building the necessary resources and capabilities through continuous learning.

How is a firm's task environment different from its general environment? A. Managers have some influence over external factors in the task environment; they have little direct effect over external forces in the general environment. B. Managers have no direct effect over external factors in the task environment; they have some influence over external forces in the general environment. C. Managers have no direct effect over external factors in the task environment; they have influence over all external forces in the general environment. D. Managers have influence over all external factors in the task environment; they have no direct effect over external forces in the general environment.

A —> Managers have some influence over external factors in the task environment; they have little direct effect over external forces in the general environment.

A firm always has a competitive disadvantage when its return on invested capital is A. below the industry average. B. 2 percent or lower in a declining industry. C. about the same as its closest competitor. D. declining steadily over two or more years.

A —> below the industry average

The founder of Teach for America, Wendy Kopp, established a mission by building on her vision, which is "one day, all children in this nation will have the opportunity to attain and excellent education." Considering this, how did Kopp implement the mission of teach for America? A) by enlisting talented young professionals as teachers B) by offering funds to increase the salaries of low-income teachers C) by starting her own line of private schools D) by starting a fundraising campaign to improve school infrastructure

A —> building on the vision, organizations establish a mission, which describes what an organization actually does.

Treadline Architects core competency is building multi-family housing in urban areas. This competency is based primarily on the decisions made by the company's top management over several years to focus on building in densely populated cities. This process is called A) path dependence B) dependence complexity C) causal dependence D) path immobility

A —> path dependence is a process in which the options that one faces in a current situation are affected by decisions made in the past

Ivan is the founder of a firm producing self-driving vehicles. Because the industry is so new and chaotic, Ivan favors a top-down strategic planning approach in which he exerts strong control over all aspects of the business, from product development and design to manufacturing and marketing. What is wrong with this scenario? A) the self-driving vehicle industry is changing too much for the top-down approach to be effective. B) the top-down approach can only be applied to specific business functions. C) the top-down approach leaves other employees uncertain about their roles in a company. D) the top-down approach is expensive to maintain, leaving the company at a competitive disadvantage.

A —> the self-driving vehicle industry is changing too much for the top-down approach to be effective.

Stakeholder Strategy

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

resource immobility

Assumption in the resource-based view that a firm has resources that tend to be "sticky" and that do not move easily from firm to firm.

Carlos is the manager of a graphic design firm, and he relies on a top-down strategic management approach to maintain tight control over the activities of his employees. The company has recently started to lose market share to its more innovative competitors, and Carlos wants to encourage his employees to start contributing to the strategy formulation process to make the company more competitive. Which of the following steps should Carlos take? A) designate Friday afternoons as time for employees to pursue outside interests loosely related to the business. B) schedule individual meetings with employees and demand that they come prepared with 5 ideas C) take an entendres vacation and see how the business naturally reorganizes itself in his absence D) allow employees to take whatever approach they feel is appropriate when dealing with customers

A—> designate Friday afternoons as time for employees to pursue outside interests loosely related to the business.

To help a firm achieve a competitive advantage, each distinct activity performed in the value chain needs to A. contribute to the firm's strategic position as either low-cost leader or differentiator. B. reduce the immobility and the heterogeneity of the firm's resources. C. create a static fit between the company's internal resources and the external environment. D. reduce the causal ambiguity and the social complexity of the firm's source of success.

A—> each distinct activity performed nerds to either add incremental value to the product or service offering or lower its relative cost.

Magical Productions is a large production company that controls a major portion of the television industry's market share along with two other firms. Despite its competitiveness with the two other firms, it is influenced by their actions and often has to consider their strategic actions before acting on its own. In this scenario, Magical Productions is most likely functioning in a(n) ________ industry. A) oligopolistic B) monopolistic C) perfectly competitive D) monopolistically competitive

A—> oligopolistic

The "Natural Nourishment" granola bars manufactured by global food foods have been the top-selling granola bars in the market. Though the market for granola bars is flooded with competitors, Global Good has been able to maintain its market position for a long time. this is mainly attributed to the pleasant texture of its granola, which comes from a proprietary processing technique used by the company. This competency of Global Good Foods will be considered as a(n) _________ resource in the VRIO framework. A) imitator B) rare C) intangible D) organizational

B —> rare

Several senior managers recently left Bass Automobile Inc. and went to work at Unicorn Autos Inc., a rival company. What does this imply? A. The resource stock of Bass Automobiles Inc. increased. B. Bass Automobiles Inc. faced resource leakage. C. The resource flow into Unicorn Autos Inc. reduced. D. Bass Automobiles Inc.'s tangible assets decreased.

B —> resource leakage might occur through employee turnover, especially if key employees leave. Significant resource leakage can erode a firms competitive adv

BlueStainless Corp. has been able to gain and sustain a competitive advantage due to its strong relationship with its employees, customers, suppliers, and local communities. The company believes in lifetime employment and ensures that its employees grow along with the company. Investors are more than satisfied with the returns on their investments. Also, 3 percent of the company's profit is spent on community development. With initiatives like these, customers feel privileged to associate themselves with BlueStainless products. This scenario best illustrates the implementation of a A. strategic analysis. B. stakeholder strategy. C. wild card event. D. black swan event.

B —> stakeholder strategy is an integrative approach to managing a diverse set of stakeholders effectively in order to gain and sustain competitive advantage.

Peerless Inc., a large conglomerate, wants to liquidate its business in certain industries to improve its overall profitability. Which of the following industries would Peerless Inc. find it most difficult to exit? A. the management consultancy industry in which the company's fixed costs are low B. the steel industry in which the company has obligations like severance pay toward employees C. the corporate training industry in which the company's commitments are mostly short-term D. the e-commerce industry where the company has no long-term contractual agreements with suppliers

B —> steel industry would be difficult to exit because the company has obligations like severance pay towards employees. Exit barriers are comprised of both economic and social factors. A company exiting an industry may still have contractual obligations to suppliers, such as employee health care and retirement benefits, as well as severance pay.

During an interview for a CEO position, Elenas potential employers ask her "if you get this jobs will you focus more lm industry effects or firm effects?" What should her answer be?

B—> firm effects. She will be able to have the most impact on those

Invoro is a market leader in consumer electronics. If Finolo and Ethver, companies that manufacture TVs, develop the same customer knowledge base and create products with the same customer appeal as Invoro, then A) Finolo & Ethver will have a VRIO resource B) Invoro will have a resource that is valuable but no longer rare C) Invoro will have a sustainable competitive advantage in the industry D) Invoro will have a resource that is rare but not longer valuable

B—> if finolo and ethver develop the same customer knowledge base and create products that provide the same appeal, then invoro will have a resource that is still valuable but not longer rare

Tonys pizza has been trying to directly copy the strategies of Moonlighy Pies. Even though it is evident that the success of Moonlight pies comes from the freshness and variety of ingredients it uses, Tony's pizza has not been able to introduce the same types of product into its recipes. This is because Moonlights network of relationships with local growers, as well as its efficient supply chain, are very difficult to emulate. Which of the following barriers to imitation does this scenario best illustrate? A) path dependence B) social complexity C) resource mobility D) resource homogeneity

B—> social complexity describes situations in which different social and business systems interact with one another. It emerges when two or more individual systems are combined. Copying the emerging complex social systems is difficult for competitors because neither direct imitation nor substitution is a valid approach

The founder of T-square construction strongly believes in the notion of CSR, so he proposed a number of philanthropic activities that he expects the company to pursue. In order to accomplish this vision, the managers should first A) review all legal codes in the areas in which T-square operates and ensure all permits are updated B) ensure that the company is profitable and has a sustainable comp adv C) make sure it is paying employees wages that allow them to live comfortably D) ask for public input on issues that the company can help address

B—> the firm is first and for most an economic instituting. W/o first gaining and sustaining a comp adv, T-square would not have the resources to meet the rest of its legal, ethical, and philanthropic responsibilities and achieve the founders vision of giving back to society.

Leading guitar string producer Wound Up inc. has enjoyed a competitive advantage based on its proprietary coating that gives its strings a clearer sound and longer lifespan than uncoated strings. One of Wound Up's competitors, however, has recently developed a similar coating using less expensive ingredients, which allows it to charger a lower price than Wound Up for similar-quality strings. Wound Ups competitive adv is in danger due to A) a lack of perceived value B) a lack of organization C) direct imitation and substitution D) resource immobility

C —> Wound Ups competitor has found a way to directly imitate the benefits of the string coating while substituting cheaper ingredients.

Which of the following statements should reflect a firm's strategy for competitive advantage? A) Our strategy is to win at any cost B) We will be number one in the industry C) Our aim is to create superior customer value while controlling costs D) We want to be the market leader by replicating our competitors strategy

C —> strategy is about creating superior value, while containing the cost to create it.

A firm produced a SIMILAR number of wall clocks at a similar cost as its competitors, this is an example of what?

Competitive parity

Patriot tools, a company that manufactures industrial tools, incurs higher costs because of its refusal to outsource its manufacturing to countries where labor costs are lower. This reflects Patriot Tools _____ responsibility. A) economic B) legal C) ethical D) demographic

C—> ethical responsibility goes beyond legal responsibility. They embody the full scope of expectations, norms, and values of its stakeholders.

Given the accelerated pace of technological change, in combination with deregulation, globalization, and demographic shifts, a firm will only be successful today if its A. competitive advantage is derived from static resource or market advantages. B. resource advantage is not causally ambiguous or socially complex. C. resource advantage is maintained for a short period of time. D. internal strengths change with its external environment in a dynamic fashion.

D

During market testing, Sensation Cosmetics (SC) realized that the cosmetics industry was dominated with multiple, well-established brands. These brands mostly sold their products in exclusive outlets and departmental stores. A new entrant like SC would require a different business model to be successful. Thus, SC started selling its products through direct marketing. In this scenario, Sensation Cosmetics accomplished substitution primarily through A. path dependence. B. technology transfer. C. knowledge diffusion. D. strategic equivalence.

D —> an Avenue of imitation for a firms valuable and rare resource is through substitution. This is often accomplished through strategic equivalence.

A(n) ___________ is best described as the strategic option that top managers decide most closely matches the current reality and which is then executed. A) bottom-up emergent strategy B) executive summary C) Realized strategy D) dominant strategic plan

D —> dominant strategic plan

Organic Food Inc., a multinational company, relies on its media partner Radio Plus to regularly advertise its offers, sales, and new products. Radio Plus is invested in this relationship because it generates most of its revenue from advertising Organic Food's products. In this scenario, Radio Plus is Organic Food Inc.'s A. stockholder. B. workforce. C. internal stakeholder. D. external stakeholder.

D —> external stakeholders include customers, suppliers, alliance partners, creditors, unions, communities, media, and govt at various levels

If a company wants to gain a competitive advantage in a highly competitive industry, it should ideally A. execute an integrated cost-leadership and differentiation position. B. copy the strategies of other firms through competitive benchmarking. C. provide goods or services similar to its competitors at higher prices. D. stake out a unique position within the industry.

D —> the key to a successful strategy is to combine a set of activities to stake out a unique position within an industry. Competitive adv has to come from performing different activities or performing the same activities differently than the rivals.

Lu runs a company that manufactures satellites for commercial and govt use. It has few rivals. At the moment, the power of buyers, the power of suppliers, and the threat of substitutes are all low. Based on this info, what can Lu conclude? A) the manufacturer is likely to see little profit until the power of buyers improves. B) in this scenario, suppliers are likely to create and sell effective substitutes C) this firm is an example of near-perfect competition D) the company is likely to be very profitable as long as threat of entry is low

D —> the stronger the forces (threat of entry, power of buyers/suppliers, and threat of substitutes) are, the stronger the expected competitive intensity, which in turn limits the industry's profit potential. Therefore, the weaker these forces are, the more profitable a come in this industry is likely to be.

Mission

Description of what an organization actually does—the products and services it plans to provide, and the markets in which it will compete.

activities

Distinct and fine-grained business processes that enable firms to add incremental value by transforming inputs into goods and services.

Soapsuds Inc., a manufacturer of cleaning agents, supplies its products to All Needs Inc., a supermarket chain. It demands that All Needs create more shelf space in its stores for Soapsuds' products. However, All Needs Inc. refuses to do this. Instead, it decides to produce its own range of cleaning agents with its own label "All Wash." In this scenario, All Needs Inc. has exercised its bargaining power as a buyer through _____ A) price stability B) retroactive market share C) enhanced technology D) backward integration

D—> backward integration. Buyers are powerful when they can credibly threaten backward integration. This occurs when a buyer moves upstream in the industry value chain, into the sellers business.

Three large firms dominate the telecommunication industry of United Canava: AD telecom inc, mystic telecom Corp, and total talk inc. instead of cutting priced competitively, these firms have resorted to non-price competition through branding and product differentiation. Which of the following industry competitive structures are these companies most likely in? A) monoplogy B) perfect competition C) monopolistic comp D) oligopoly

D—> oligopoly industry is consolidated with few (large) firms, differentiated products, high barries to entry, and some degree of pricing power. Non-price comp is the preferred mode of comp in an oligopoly

Ironhorse tools has used $700,000 from its total $1,650,000 to invest in upgrading its manufacturing facilities. It's accounts receivable from customers is estimated to be $130,000 and accounts payable $75,000. In monetary terms, what would Ironhorses resource flows be? A) $1,650,000 B) $130,000 C) $75,000 D) $700,000

D—> resource flows are a formal level of investments to maintain or build a resource

Kimba Inc. is a manufacturer of smart watches that track the wearers heart relate and sleep patterns. Which of the following is most likely an implication of new firms entering this industry? A) the bargaining power of buyers will reduce B) the industry's overall profit potential and sales will increase C) the rivalry among existing competitors will reduce D) the incumbent firms will spend more to satisfy their existing customers

D—> the incumbent firms will spend more to satisfy their existing customers. The threat of entry by additional competitors may force incumbent firms to spend more. Larger investments in value creation further reduce an industry's profit potential if prices cannot be raised.

Firm Effects

Firm performance attributed to the actions managers take.

Industry Effects

Firm performance attributed to the structure of the industry in which the firm competes.

Black Swan events

Incidents that describe highly improbable but high-impact events.

mobility barriers

Industry-specific factors that separate one strategic group from another.

Strategic management

Is best described as an inter gray ice management field that combined analysis, formulation, and implementation in the quest for competitive advantage.

Entry barriers

Obstacles that determine how easily a firm can enter an industry and often significantly predict industry profit potential.

Bryan is a manager at a software firm. The CEO tells him that the industry as a whole has become increasingly profitable over the past five years. Based on this information, Bryan is more likely to expect A) increased competition in the future and therefore he should recommend that the company upgrade its products to slow the entry of rival companies B) increased profitability in the future and therefore he should recommend that the company remain on its current course C) a leveling off of profitability in the next few years and therefore he should recommend that the company cooperate with its rivals to stimulate the industry D) decreased competition in the next few years and therefore he should recommend that the company take adv of its pricing power.

One of the key insights of the five forces model is that the more profitable an industry, the more attractive it becomes to competitors. With the threat of additional capacity coming into an industry, incumbent firms may lower prices to make entry appear less attractive to the potential new competitors, or they may spend more to satisfy their existing customers

Capabilities

Organizational and managerial skills necessary to orchestrate a diverse set of resources and deploy them strategically.

A firm is said to gain a competitive advantage when it can

Provide products similar to its competitors, but at a lower price

core values statement

Statement of principles to guide an organization as it works to achieve its vision and fulfill its mission, for both internal conduct and external interactions; it often includes explicit ethical considerations.

_________ is described as any activity a firm pursued to explore and developed new products and processes, new markets, or new ventures.

Strategic initiative

What is the strategic management process?

Strategic leaders design a method to formulate and implement strategy.

resource stock

The firm's current level of intangible resources.

resource flows

The firm's level of investments to maintain or build a resource.

Intended Strategy

The outcome of a rational and structured top-down strategic plan.

VRIO Framework

The resource-based framework that focuses on the value (V), rarity (R), imitability (I), and organizational (O) aspects of resources and capabilities.

Threat of Entry

The risk that potential competitors will enter an industry.

strategy

The set of goal-directed actions a firm takes to gain and sustain superior performance relative to competitors.

resource-allocation process (RAP)

The way a firm allocates its resources based on predetermined policies, which can be critical in shaping its realized strategy.

How is a diagnosis completed?

Through analysis of the firms external and internal environments (part 1 AFI framework)

How is a guiding policy achieved?

Through strategy formulation resulting in the firms corporate, business, and functional strategies (part 2 AFI framework)

How are coherent actions added to the firms guiding policy?

Through strategy implementation (part 3 AFI framework)

core competencies

Unique strengths, embedded deep within a firm, that are critical to gaining and sustaining competitive advantage.

industry convergence

a process whereby formerly unrelated industries begin to satisfy the same customer need

The power of suppliers

can raise the cost of production by demanding higher prices for their inputs or by reducing the quality of the input factor or service level delivered

Vision

captures an organization's aspiration and spells out what it ultimately wants to accomplish

power of buyers

concerns the pressure an industry's customers can put on the producers' margins in the industry by demanding a lower price or higher product quality

Strategic commitments are actions that are

costly, long-term oriented, and difficult to reverse.

Emergent strategy

describes any unplanned strategic initiative bubbling up from deep within the organization.

autonomous actions

describes any unplanned strategic initiative bubbling up from deep within the organization.

Realized strategy

generally formulated through a combination of its top-down strategic intentions and bottom-up emergent strategy

monopolistic competition

has many firms, a differentiated product, some obstacles to entry, and the ability to raise prices for a relatively unique product while retaining customers

perfect competition

industry is fragmented and has many small firms, a commodity product, ease of entry, and little or no ability for each individual firm to raise its prices

Oligopoly

is consolidated with a few large firms, differentiated products, high barriers to entry, and some degree of pricing power

Threat of Substitutes

is the idea that products or services available from outside the given industry will come close to meeting the needs of current customers

competitive disadvantage

underperformance relative to other competitors in the same industry or the industry average

Product Oriented

vision defines a business in terms of a good or service provided

Customer-oriented vision statements

vision statements allow companies to adapt to changing environments.