Mgmt 493 Chapter 1: What is Strategy
Which of the following is an example of fulfilling philanthropic responsibilities?
A legal firm donates large amounts of money to charities.
Which of the following does not explain why activist investors have more power over a firm than individual investors?
Activist investors have more legitimacy than individual investors. Both individual and activist investors can claim the same legitimacy as stockholders. However, shareholder activists have much more power over a firm for various reasons.
Which of the following strategies does Twitter need to implement to increase its competitive advantage?
B. increase its user base As mentioned in Chapter Case 1, Twitter struggles to grow its user base, which hinders its quest for a competitive advantage.
_____ is best described as an integrative management field that combines analysis, formulation, and implementation in the quest for competitive advantage.
Strategic Management Strategic management is the integrative management field that combines analysis, formulation, and implementation in the quest for competitive advantage. Mastery of strategic management enables an individual to view a firm in its entirety. It also enables an individual to think like a general manager to help position his or her firm for superior performance.
Which of the following is the most accurate description of stakeholder impact analysis?
a decision tool with which managers can recognize the needs of different stakeholders
Which of the following is an element of good strategy?
a set of coherent actions to implement the firm's guiding policy
What part of the AFI strategy framework does the question "How does the firm make money?" relate to?
competitive advantage, firm performance, and business models
Within corporate social responsibility, _____ essentially reflects the notion of a business voluntarily giving back to society.
corporate citizenship
In the final step of the stakeholder impact analysis, a firm
decides a course of action to address the stakeholders' concerns.
In the pyramid of corporate social responsibility, _____ responsibilities are the foundational building block.
economic
Paying taxes to local government authorities from the annual revenues generated by a firm represents the firm's _____ responsibilities.
economic
Sun Inc., a vendor, regularly supplies pallets to Octangle Corp. for its shipping business. Therefore, Sun Inc. is Octangle Corp.'s
external stakeholder. Sun Inc. is Octangle Corp.'s external stakeholder. External stakeholders include customers, suppliers, alliance partners, creditors, unions, communities, media, and governments at various levels.
An effective strategist _____ the formulated strategy through structure, culture, and controls.
implements
Which of the following factors most effectively contributed to the success of Threadless in comparison to other companies with T-shirt designs, including American Eagle, Old Navy, and Urban Outfitters?
its reliance on crowdsourcing As mentioned in Strategy Highlight 1.1, Threadless leverages crowdsourcing, a process in which a group of people voluntarily perform tasks that were traditionally being completed by a firm's employees. By doing this, the company uses the wisdom of the crowds, resulting in decisions by many participants in an online forum that are often better than decisions made by a single individual.
Which of the following is not competitive strategy?
operational effectiveness
A firm is said to gain a competitive advantage when it can
provide products similar to its competitors, but at lower prices.
Which of the following is an example of a firm's internal stakeholders?
stockholders
According to AFI strategy framework, in which of the following tasks of strategic management is a firm's vision, mission, and values identified?
strategy analysis
Which of the following stages in the AFI strategy framework involves designing a business, corporate, and global strategy?
strategy formulation
Which of the following tasks in the AFI strategy framework involves putting the formulated strategy into practice through organizational structure, culture, and controls?
strategy implementation
Which of the following forces is most closely related to industry effects within the automobile industry?
the types of products and the services offered within the industry ndustry effects describe the underlying economic structure of the industry. They attribute firm performance to the industry in which the firm competes. The structure of an industry is determined by elements common to all industries such as entry and exit barriers, number and size of companies, and types of products and services offered.
For a firm that operates in an industry where competition is high, which of the following practices will result in inferior performance?
trying to be everything to everybody by combining different competitive strategies Because resources are limited, managers must carefully consider their strategic choices in the quest for competitive advantage. Trying to be everything to everybody will likely result in inferior performance. Although the idea of combining different business strategies seems appealing, it is actually quite difficult to execute.
Which of the following is an example of a firm's external stakeholder?
customers Stakeholders can be grouped by whether they are internal or external to a firm. A firm's external stakeholders include customers, suppliers, alliance partners, creditors, unions, communities, media, and governments at various levels.
Due to several black swan events in the past, the
implicit trust relationship between the corporate world and society at large has deteriorated The implicit trust relationship between the corporate world and society at large has deteriorated due to the arrival of several black swans.
Which of the following statements is true of the social responsibilities of a business?
A firm's ethical responsibilities go beyond its legal responsibilities.
For a strategist, which of the following is not an implication of effective strategic management?
A firm's performance is determined by a set of independent factors, which includes firm and industry effects.
The average cost of production for a bottle of vitamin water in the industry is $4 while its average price is $7. StoreAll Inc. manufactures the same product for $3 per bottle and sells it for $7 per bottle. Which of the following statements is most likely true of StoreAll Inc. in this scenario?
It has a competitive advantage in the industry. StoreAll Inc. most likely has a competitive advantage in the industry. A firm that achieves superior performance relative to other competitors in the same industry or the industry average has a competitive advantage.
Which of the following is not an example of a black swan event?
election of President Reagan
Van Dyke's Fashion Inc., a company that manufactures clothing, incurs higher costs because of its refusal to build factories in countries where child labor is prevalent. This reflects Van Dyke's Fashion's _____ responsibility.
ethical
In the AFI strategy framework, strategy analysis primarily involves
evaluating the effects of internal resources and core competencies on a firm's potential to gain and sustain a competitive advantage.
The interaction between a firm and its diverse internal and external stakeholders is best described as a(n)
exchange relationship. All stakeholders make specific contributions to a firm, which in turn provides different types of benefits to different stakeholders. The firm, therefore, is embedded in a multifaceted exchange relationship with a number of diverse internal and external stakeholders.
Managers use the AFI strategy framework primarily to
explain and predict differences in firm performance.
Stakeholder impact analysis primarily helps a firm
gain a competitive advantage while acting as a good corporate citizen. Stakeholder impact analysis is a decision tool with which managers can recognize, prioritize, and address the needs of different stakeholders, enabling the firm to achieve competitive advantage while acting as a good corporate citizen.
Stakeholder strategy is an integrative approach to managing a diverse set of stakeholders effectively in order to
gain and sustain competitive advantage. Stakeholder strategy is an integrative approach to managing a diverse set of stakeholders effectively in order to gain and sustain competitive advantage.
A firm's economic responsibilities are primarily directed toward
gaining and sustaining competitive advantage.
The best example of a firm's external stakeholder is a(n)
government agency that regulates the prices of products manufactured by the firm The best example of a firm's external stakeholder is a government agency that regulates the prices of products manufactured by the firm. External stakeholders of a firm include customers, suppliers, alliance partners, creditors, unions, communities, media, and governments at various levels.
The first step in stakeholder impact analysis involves
identifying the stakeholders that currently have, or potentially can have, a material effect on a company. In the first step of stakeholder impact analysis, the firm focuses on stakeholders that currently have, or potentially can have, a material effect on a company. This prioritization identifies the most powerful stakeholders (both internal and external) and their needs.
The society and shareholders mandatorily require a firm to perform its _____ responsibilities.
legal
The minimum wage in the country of New Morland is $8 an hour. Odion, a restaurant in New Morland's capital city, pays its servers $8 per hour. However, the management of the restaurant feels that this amount is excessive for workers whose only job is to clear tables. By continuing to adhere to the rules set by the government of New Morland, which of the following responsibilities is Odion satisfying?
legal responsibilities
Which of the following responsibilities results from a society's mere expectations of a business and not because the society and the shareholders mandatorily require the business to demonstrate it?
philanthropic responsibilities
Which of the following is an implication of all firms in an industry pursuing a low-cost position through application of competitive benchmarking?
The firms would eventually have no resources to invest in product and process improvements. The firms would eventually have no resources to invest in product and process improvements.
Which of the following statements accurately describes firm effects?
They attribute firm performance to the actions managers take within a chosen industry. Firm effects attribute firm performance to the actions managers take within a chosen industry. Managers' actions tend to be more important in determining firm performance than the forces exerted on the firm by its external environment.
Which of the following provides an example of what AFI strategy framework is used for?
Using AFI, the Gasquet Motor Company was able to implement a strategy that produced high-quality cars more efficiently and thereby reduced costs.
When the strong dictatorial rule in Backenstein unexpectedly collapsed due to the shocking death of the royal family in an explosion, the nation's economy experienced drastic changes. The laws became more restrictive, the country lost many locally produced resources and products, and the distribution of wealth became inequitable. The unexpected event that led to these changes can best be described as a(n) _____ event.
black swan The unexpected event that led to these changes can best be described as a black swan event. The metaphor of a black swan describes the high impact of a highly improbable event.
Which of the following statements accurately describes corporate social responsibility (CSR)?
CSR provides a conceptual model that more completely describes a society's expectations.
____ is best described as a framework 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.
Corporate social responsibility Corporate social responsibility (CSR) is a framework that helps firms recognize and address the economic, legal, ethical, and philanthropic expectations that society has of the business enterprise at a given point in time.
Silver Screen Cinemas Inc. and Digi Now Inc. are two companies that own and run movie theaters in malls and other commercial areas. While Silver Screen Cinemas Inc. pursues a cost-leadership strategy, Digi Now Inc. adopts a differentiation strategy. Which of the following statements is most likely true of this scenario?
Digi Now and Silver Screen Cinemas will not be direct competitors to each other, and their customer segments will overlap very little. Although these companies are in the same industry, their customer segments will most likely overlap very little, and they will not be direct competitors. That is because each firm has chosen a distinct but different strategic position; both can win if they have a distinct and well-executed competitive strategy.
Which of the following is an accurate statement about the relationship between firm effects and industry effects?
Firm effects deal with a manager's actions; industry effects deal with external circumstances.
Jake's Taxi Service is a new entrant to the taxi industry. It has achieved success by staking out a unique position in the industry. How did Jake's Taxi Service mostly likely achieve this position?
providing long-distance cab fares at a lower rate than competitors; servicing the same area as competitors Jake's Taxi Service achieved a unique position in the industry by providing long-distance cab fares at a lower rate than competitors while servicing the same area as competitors. To stake out a unique position, a company must either perform the same activities as competitors in a way that is better for customers or perform different activities. Also, this company must provide an advantage for customers without trading the benefit with a disadvantage.
Pink Couture Inc. and Pink Blush Inc. are two companies in the apparel industry. While Pink Couture Inc. focuses on providing unique product features and superior customer service, Pink Blush Inc. focuses on low prices and minimal customer service. Both companies have been able to gain a competitive advantage. This is most likely because the companies have
pursued distinct strategic positions. In this scenario, the two firms have gained a competitive advantage by pursuing distinct strategic positions. Cost-leadership and differentiation are distinct strategic positions. The key to successful strategy is to combine a set of activities to stake out a unique position within an industry.
n the United States, which of the following was born out of dissatisfaction with the capitalist system in 2011?
the Occupy movement In the United States, the Occupy Wall Street protest movement was born in 2011 out of dissatisfaction with the capitalist system. Issues of income disparity, corporate ethics, corporate influence on governments, and ecological sustainability were key drivers.
Which of the following forces tends to be more important in determining a firm's perform
the actions of managers within the firm The key point is that managers' actions tend to be more important in determining firm performance than the forces exerted on the firm by its external environment.
Which of the following statements about strategy is not true?
Operational effectiveness and competitive benchmarking should be treated as strategy. Operational effectiveness, competitive benchmarking, or other tactical tools are not strategy. All these elements may be a necessary part of a firm's functional and global initiatives to support its competitive strategy, but these elements are not sufficient to achieve competitive advantage.
Which of the following scenarios best illustrates a good stakeholder strategy?
PA Corp. distributes only 70 percent of its annual profit after taxes to shareholders, while the remaining is distributed among employees and the local community, and invested for further research. PA Corp. demonstrates a good stakeholder strategy because it distributes only 70 percent of its annual profit after taxes to its shareholders, while the remaining is distributed among employees and the local community, and invested for further research. A core tenet of stakeholder strategy is that a single-minded focus on shareholders alone exposes a firm to undue risks that can undermine economic performance and can even threaten the very survival of the enterprise.
_____ provides a decision tool that enables a firm to act as a good corporate citizen by allowing its managers to recognize, prioritize, and address the needs of different groups of individuals who take personal interest in the firm's performance and survival.
Stakeholder impact analysis Stakeholder impact analysis provides a decision tool with which managers can recognize, prioritize, and address the needs of different stakeholders. This tool helps the firm achieve a competitive advantage while acting as a good corporate citizen.
_____ is best described as a set of goal-directed actions a firm takes to gain and sustain superior performance relative to competitors.
Strategy Strategy is a set of goal-directed actions a firm takes to gain and sustain superior performance relative to competitors.
Which of the following stages of the strategic management process involves an evaluation of a firm's external and internal environments?
Strategy analysis A good strategy consists of a diagnosis of the competitive challenge. This element is accomplished through strategy analysis of the firm's external and internal environments.
Which of the following statements about a firm's stakeholders is true?
Within stakeholder groups there can be significant variation in the power a stakeholder may exert on a firm. Even within stakeholder groups there can be significant variation in the power a stakeholder may exert on the firm. Although both individual and institutional investors can claim the same legitimacy as stockholders, institutional investors have much more power over a firm.
Which of the following scenarios illustrates a firm that has a sustainable competitive advantage?
Zhang Corp. was able to hold its market share of 68 percent in the social networking industry for more than three years. A firm that is able to outperform its competitors or the industry average over a prolonged period of time has a sustainable competitive advantage. Thus, Zhang Corp. has a sustainable competitive advantage because it has been able to hold its market share of 68 percent in the social networking industry for more than three years.
The U.S. government legitimized claims by thousands of businesses and individuals in the aftermath of the BP oil spill in the Gulf of Mexico, causing the claims to become of great urgency to BP. This best represents the process of
addressing stakeholder concerns.
Hewlett-Packard was not able to maintain its competitive advantage because it did not
effectively address the challenges of mobile computing.
Which of the following is an example of competitive parity?
A firm produces wall clocks at the same rate as its competitors
The _____ is a model that links strategy analysis, strategy formulation, and strategy implementation, which together helps managers plan and implement a strategy that can improve performance and result in competitive advantage.
AFI strategy framework
_____ are incidents that describe highly improbable but highly impactful events
Black swan events Black swan events are incidents that describe highly improbable but highly impactful events. Several black swan events eroded the public's trust in business as an institution and capitalism as an economic system.
Which of following practices of a firm satisfies its ethical responsibilities?
selling vaccines at a subsidized price in a less developed country even though this results in reduced shareholder returns
Which of the following was a key driver in the Occupy movement of 2011?
the issue of income disparity In the United States, the Occupy Wall Street protest movement was born in 2011 out of dissatisfaction with the capitalist system. Issues of income disparity, corporate ethics, corporate influence on governments, and ecological sustainability were key drivers.
Which of the following statements should ideally reflect a firm's strategy for competitive advantage?
Our aim is to create superior customer value while controlling costs. The statement that should ideally reflect a firm's strategy for competitive advantage is "Our aim is to create superior customer value while controlling costs." Strategy is about creating superior value, while containing the cost to create it. Grandiose statements are not strategy; they provide little managerial guidance and frequently fail to address the economic fundamentals.
Why is strategy considered to be the science of success and failure?
Strategies use principles that can be applied universally to all organizations.
Shortly after the small island of Balamia experienced multiple unexpected high-intensity earthquakes that caused massive destruction, many banks and insurance companies filed for bankruptcy. This left the economy of the country in a poor state. The natural calamity in Balamia best exemplifies
a black swan event. The natural calamity in Balamia best exemplifies a black swan event. The metaphor of a black swan describes the high impact of a highly improbable event.
Which of the following best qualifies as a firm's internal stakeholder?
a manager taking care of the firm's operations in a foreign market A manager taking care of the firm's operations in a foreign market best qualifies as the firm's internal stakeholder. A firm's internal stakeholders include stockholders, employees (including executives, managers, and workers), and board members.
Which of the following is not a stakeholder attribute that managers consider during stakeholder impact analysis?
a stakeholder's liquidity Stakeholder impact analysis takes managers through a five-step process of recognizing stakeholders' claims. In each step, managers must pay particular attention to three important stakeholder attributes: power, legitimacy, and urgency.
The management of Five Square Corp. wants to reduce the separation between ownership (by shareholders) and control of the firm (by professional managers). Which of the following practices would best help the company do this?
allowing employees to purchase the stock of the company at a discounted rate Allowing employees to purchase the stock of the company at a discounted rate would best help the company reduce the separation between ownership and control of the firm. Many companies turn employees into shareholders through employee stock ownership plans (ESOPs). These plans allow employees to purchase stock at a discounted rate or use company stock as an investment vehicle for retirement savings.
A firm's stakeholder strategy primarily allows the firm to
analyze and manage how various external and internal stakeholders interact to jointly create and trade value. Stakeholder strategy allows a firm to analyze and manage how various external and internal stakeholders interact to jointly create and trade value. It is an integrative approach to managing a diverse set of stakeholders effectively in order to gain and sustain competitive advantage.
A firm always has a competitive disadvantage when its return on invested capital is
below the industry average. A firm always has a competitive disadvantage when its return on invested capital is below the industry average.
If SA Pharmaceuticals obtains an 18 percent return on invested capital, which of the following will help determine if it has a competitive advantage over other pharmaceutical companies?
comparing the return to the return on invested capital obtained by other firms in the industry Comparing the return to the return on invested capital obtained by other firms in the industry will help determine if SA Pharmaceuticals has a competitive advantage. Competitive advantage is always relative, not absolute.
The Scoop, Ltd. is a magazine publishing company whose average return on invested capital is approximately 5 percent. Because magazine publishing is a declining industry, the industry average has been negative (-5 percent) for the last few years. In this scenario, The Scoop Ltd. has a
competitive advantage.
A firm that achieves superior performance relative to other firms in the same industry or the industry average has a(n)
competitive advantage. A firm that achieves superior performance relative to other competitors in the same industry or the industry average has a competitive advantage.
Underperformance relative to other firms in the same industry or the industry average results in a(n) _____ for a firm.
competitive disadvantage If a firm underperforms relative to its rivals or the industry average, it has a competitive disadvantage.
Rapida Inc. and Click Inc. are two companies that have been manufacturing typewriters for almost 30 years. Due to the reduced demand for typewriters today, both companies' average return on invested capital is approximately -5 percent. The current industry average is 2 percent. In this scenario, Rapida Inc. and Click Inc. most likely have
competitive parity with each other. In this scenario, Rapida Inc. and Click Inc. most likely have competitive parity with each other. Competitive parity refers to the performance of two or more firms at the same level.
While creating its AFI strategy framework, the Kowalski Candy Company decided what markets the firm should compete in. By doing this, what type of strategy did the company devise?
corporate strategy
Industry effects describe the underlying _____ structure of the industry.
economic Industry effects describe the underlying economic structure of the industry. They attribute firm performance to the industry in which the firm competes.
Which of the following is step 3 in the five-step process of stakeholder impact analysis?
identifying the opportunities and threats the stakeholders present In step 3 of stakeholder impact analysis, the firm asks, "What opportunities and threats do our stakeholders present?" Since stakeholders have a claim on the company, opportunities and threats are two sides of the same coin.
The amount of xylene that can be used in household paint is legally limited to 0.03 percent. Anything beyond this amount is hazardous to health and the environment, and considered a legal offense. Consequently, CW Paints Corp. has vouched to make its products as safe as possible. Therefore, it manufactures xylene-free paints even though this increases its costs and reduces the dividends paid to its shareholders in the long run. Which of the following responsibilities is CW Paints Corp. primarily compromising in this scenario?
economic responsibilities toward its shareholders
The board at TriCom Manufacturing Corp. has decided to allocate 20 percent of the company's shares to its workforce, at a discounted price. Apart from being a valued investment, the plan will allow the employees to take personal responsibility for the firm's performance. Which of the following employee incentive schemes does this best illustrate?
employee stock ownership plan This best illustrates employee stock ownership plans. Companies turn employees into shareholders through employee stock ownership plans (ESOPs). These plans allow employees to purchase stock at a discounted rate or use company stock as an investment vehicle for retirement savings.
Which of the following is not one of the three interdependent tasks of strategic management?
estimate
In 2010, an explosion of a BP oil drill resulted in the deaths of 11 workers and the largest environmental disaster in U.S. history. The BP CEO was fired because of his ineffective handling of the crisis. The CEO lost his job because he failed to uphold _____ responsibilities.
ethical
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
external stakeholder. In this scenario, Radio Plus is Organic Food Inc.'s external stakeholder. External stakeholders include customers, suppliers, alliance partners, creditors, unions, communities, media, and governments at various levels.
Rachel owns a large portion of GM Cube Inc.'s stocks. However, she is not employed by the company. In this scenario, Rachel is the company's
internal stakeholder. In this scenario, Rachel is the company's internal stakeholder. Internal stakeholders of a firm include stockholders, employees (including executives, managers, and workers), and board members.
The past black swan events in the United States demonstrate that
managerial actions can affect the economic well-being of large numbers of people around the globe. Black swan events demonstrate that managerial actions can affect the economic well-being of large numbers of people around the globe. The implicit trust relationship between the corporate world and society at large has deteriorated due to the arrival of several black swans
During an AFI planning session, the managers of the Fukuhara Motorcyle Corporation decided to place various stages of production in different countries. By doing this, what issue did the firm address?
organizational design
The society and the shareholders just expect, and do not mandatorily require, a firm to
pay its workers more than the minimum living wage.
Which of the following is typically an economic responsibility of a firm?
paying adequate returns to the firm's stockholders on the capital invested by them
Which of the following is not an example of a software company's external stakeholder?
project managers A firm's external stakeholders include customers, suppliers, alliance partners, creditors, unions, communities, media, and governments at various levels. Its internal stakeholders are stockholders, employees (including executives, managers, and workers), and board members
Which of the following would be considered a weak stakeholder strategy?
putting shareholder interests above the interests of other stakeholders A core tenet of stakeholder strategy is that a single-minded focus on shareholders alone exposes a firm to undue risks. Simply putting shareholder interest above all else can undermine economic performance and even threaten the very survival of the enterprise.
In stakeholder impact analysis, identifying the opportunities and threats presented by stakeholders is immediately followed by
recognizing the economic, legal, ethical, and philanthropic responsibilities of the firm to its stakeholders.
As the legal owners, _____ have the most legitimate claim on a company's profits.
shareholders As the legal owners, shareholders have the most legitimate claim on a company's profits. A firm has to ensure that its primary stakeholders—the firm's shareholders and other investors—achieve their objectives.
A core tenet of stakeholder strategy is that a
single-minded focus on shareholders alone exposes a firm to undue risks that can threaten the very survival of the enterprise A core tenet of stakeholder strategy is that a single-minded focus on shareholders alone exposes a firm to undue risks that can undermine economic performance and can even threaten the very survival of the enterprise. The strategist's job, therefore, is to understand the complex web of exchange relationships among different stakeholders.
If a company wants to gain a competitive advantage in a highly competitive industry, it should ideally
stake out a unique position within the industry. The key to successful strategy is to combine a set of activities to stake out a unique position within an industry. Competitive advantage has to come from performing different activities or performing the same activities differently than rivals are doing. Competing to be similar but just a bit better than a competitor is likely to be a recipe for cutthroat competition and low profit potential.
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
stakeholder strategy. The scenario best illustrates the implementation of a stakeholder strategy. Stakeholder strategy is an integrative approach to managing a diverse set of stakeholders effectively in order to gain and sustain competitive advantage.
In _____, a firm frames a guiding policy to address the competitive challenge.
strategy formulation A good strategy includes 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.
Through _____, a firm puts its guiding policy into practice by employing a set of coherent actions.
strategy implementation A good strategy includes a set of coherent actions to implement the firm's guiding policy. This element is accomplished through strategy implementation.
Which of the following groups is considered to be the primary stakeholder for public-stock companies?
suppliers of capital For public-stock companies, key stakeholders are the shareholders and other suppliers of capital. If shareholders are not satisfied with returns to investment, they will sell the company's stock, leading to depreciation in the firm's market value.
Patterson Foods Inc. was the first company to start selling energy bars in its country—a product that gained popularity among diverse groups. Soon, other companies started to sell their own brands of energy bars, thereby giving Patterson Foods ample competition. In response, Patterson Foods decided to limit its variety of energy bars to only four. However, it ensured that these four varieties were low in calories and low in cost. With this innovation, Patterson Foods Inc. consistently outperformed its competitors for ten years. In this scenario, Patterson Foods Inc. maintained a _____ through its innovative strategy.
sustainable competitive advantage In this scenario, Patterson Foods Inc. maintained a sustainable competitive advantage through its innovative strategy. A firm that is able to outperform its competitors or the industry average over a prolonged period of time has a sustainable competitive advantage.
During strategy implementation, managers primarily focus on deciding the
type of corporate governance that is most effective and ways in which it can put the formulated strategy into practice.
State-level government agencies that check whether firms are meeting statutory safety measures in their production units are considered to be the firms'
external stakeholders. State-level government agencies that check whether firms are meeting statutory safety measures in their production units are considered to be the firms' external stakeholders. External stakeholders of a firm include customers, suppliers, alliance partners, creditors, unions, communities, media, and governments at various levels.
After a firm has identified its key stakeholders in stakeholder impact analysis, the immediate next step is to
identify stakeholders' interests and claims. In step 1 of stakeholder impact analysis, the firm focuses on stakeholders that currently have, or potentially can have, a material effect on a company. In step 2, the firm asks, "What are our stakeholders' interests and claims?" Managers need to specify and assess the interests and claims of the pertinent stakeholders using the power, legitimacy, and urgency criteria.
Javier, a retired CEO, invests capital in a start-up company that creates budgeting software. He mentors the entrepreneur and the employees of the company because he wants the company to perform well and survive in the market. Thus, Javier is the start-up company's
stakeholder. Javier is the start-up company's stakeholder. Stakeholders have a vested claim or interest in the performance and continued survival of the firm. They can be organizations, groups, or individuals who can affect or be affected by a firm's actions.
FindFor Inc. is an e-commerce retail firm that sells a variety of merchandise online. Through services like cash on delivery, easy return, and online tracking, the company has created more customer value than its competitors (brick-and-mortar businesses) at the same price. Also, the company's costs are substantially low due to minimal investment in operation and administration. In this scenario, FindFor Inc. has most likely been able to provide superior value and cost control through
strategic positioning. In this scenario, FindFor Inc. has been able to provide superior value and control its costs through strategic positioning. Strategy is about creating superior value, while containing the cost to create it. Managers achieve this combination of value and cost through strategic positioning. That is, they stake out a unique position within an industry that allows the firm to provide value to customers, while controlling costs.
A company wants to determine how industry effects have affected its profitability. Which of the following elements should the company focus on?
the barriers to entry and exit within the industry Industry effects describe the underlying economic structure of the industry. They attribute firm performance to the industry in which the firm competes. The structure of an industry is determined by elements common to all industries such as entry and exit barriers, number and size of companies, and types of products and services offered.
In a firm, a strategist's job should be to
understand the complex web of exchange relationships among different stakeholders. A strategist's job is to understand the complex web of exchange relationships among different stakeholders. By doing so, the firm can proactively shape the various relationships in order to maximize the joint value created, and manage the distribution of this larger pie in a fair and transparent manner.