Strategy Exam #1

What does the Greek verb strategos mean and what does it refer to?

"Army leader" and the idea of stratego refers to defeating an enemy effectively using resources

Who is Sun Tzu?

- A Chinese strategist and philosopher - Author of The Art of War

What is a business model?

- A central element of a strategic plan - States the process through which a company hopes to earn profits

Piracy of intellectual property rights is _______.

- A process wherein illegal copies are made and sold by others -poses a serious threat to such profits - Law enforcement agencies and courts in many countries provide organizations with the necessary legal mechanisms to protect their intellectual property from piracy

What is Distinctive competence?

- A set of activities that a company performs extremely well - Ex. Apple always introducing innovative products or Southwest Operations capabilities

What is a dynamic capability?

- A unique ability to create new capabilities by continually updating a firm's array of capabilities to keep pace with changes in the environment - Ex. Coca Cola introducing new product lines to compete, GE buying and selling new companies to maintain market share

What was King Arthur of Britain's approach to strategy?

- Arthur considered himself and each of his knights equal - No voice would be seen as more important than the others

Who is Thomas L. Friedman?

- Author of The World Is Flat: A Brief History of the Twenty-First Century (2005) - He argued that many of the advantages that companies in developed countries such as the United States, Japan, and Great Britain take for granted are disappearing - Said companies of developed countries must improve their strategies if they are to remain successful

Pros of a Celebrity CEO:

- Can serve as an intangible asset for the CEO's company and may increase opportunities available to the company - May increase stock price, enhance a firm's image, and improve the morale of employees and other stakeholders

Characteristics of a Scoundrel CEO:

- Display high levels of fame but low levels of reputation - Ex. Kenneth Lay of Enron

Cons of a Celebrity CEO:

- Entails risks for an organization - Increased attention to the company via the celebrity CEO means any gaps between actual and expected company performance are magnified - If a celebrity CEO acts in an unethical or illegal manner, chances are that the CEO's company will receive much more media attention than will other companies with similar problems

What was Alfred Chandler's 1962 book Strategy and Structure: Chapters in the History of the Industrial Enterprise about?

- How strategy and organizational structure need to be consistent with each other to ensure strong company performance

What is Steven Levitt and Stephen Dubner's Freakanomics about?

- It examines hidden factors that are usually overlooked when seeking to understand complex situations - One example in this book surrounds the different incentives owners and real estate agents face when seeking to sell a home

What is Niccolò Machiavelli's 1532 book The Prince about?

- It is regarded by many as an insightful guide for conquering ad ruling territories - It offered recipes for success to government leaders - Some of its suggestions are devious

What was the Strategic Management Journal?

- It offered a forum for researchers interested in building knowledge about strategic management - Published path breaking insights about strategic management

Characteristics if a Hidden Gem CEO:

- Lack fame but possess positive reputations - Their skills are mainly known by their employees and competitors - Ex. Anne Mulcahy of Xerox

What strategy approach did Moses use during the Hebrews' exodus from Egypt?

- Moses used a hierarchical approach - he delegated authority to other leaders, each of whom oversaw a group of people - This hierarchical delegation of authority created a command structure that freed Moses to concentrate on the biggest decisions and helped him implement his strategies

What is Michael Porter's book called, Competitive Strategy: Techniques for Analyzing Industries and Competitors about?

- Offers concepts such as five force analysis and generic strategies that continue to strongly influence how executives choose strategies

Characteristics of a Silent Killer CEO:

- Overlook and ignore sources of harm to their companies - While scoundrels are closely monitored and scrutinized by the media, it may be too late before the poor ethics or incompetence of the silent killers is detected - Sometimes worse than scoundrels

What does PESTEL analysis stand for?

- Political - Economic - Social - Technological - Environmental - Legal

Characteristics of an Icon CEO:

- Possess both fame and good reputations - Ex. Richard Branson, Warren Buffet

Effective strategic leaders

Have the ability to inspire employees to work hard and embrace lofty ambitions to move the organization forward

Portability measures

Helpful for understanding how much profit, if any, is really being made

Leverage measures

Helpful for understanding if debt level is too high

Strategy as perspective is ________.

How executives interpret the competitive landscape around them

What is organizational performance?

How well an organization is doing to reach its vision, mission, and goals

Resources are difficult to imitate when _______.

If they cannot be easily duplicated by competitors and are often protected by various legal means, including trademarks, patents, and copyrights

Debt-to-income ratio (Monthly debt payments/monthly income)

If you have a monthly debt-to-income ratio higher than 40 percent, you may be on the verge of becoming a credit risk

What is the backward vertical integration strategy?

Involves a buyer entering an industry that it purchases goods or services from

What is the forward vertical integration strategy?

Involves a supplier entering the industry it supplies into

What are trademarks?

Phrases, pictures, names or symbols used to identify a particular organization

A realized strategy is ________.

The plan of action than an organization actually follows and are a product of a company's intended strategy

Environment is _______.

The set of external conditions and forces that have the potential to influence the organization

Debt-to-equity ratio

The use of debt varies across industries - auto companies, for example, tend to have high debt-to-equity because they must build massive factories

What are liquidity measures?

They are helpful for understanding if obligations can be paid when due

Why are consistent patterns risky?

They are risky because a firm becomes to predictable

What is the purpose of the Five Forces Analysis?

To identify how much profit potential exists in an industry

What is the goal of the marketing mix?

To provide a strong alignment of the 4 P's to offer customers a coherent and persuasive message

An emergent strategy is ________.

What the company will do in reaction to unexpected opportunities and challenges

Who is Frederick Winslow Taylor?

- Published The Principles of Scientific Management in 1911 - He realized that most tasks within organizations were organized haphazardly - Believed businesses would be much more efficient if management principles were derived through scientific investigation - Stressed how organizations could be more efficient through identifying the "one best way" of performing important tasks

Strategic plans are ________.

- The essence of strategy - They are carefully crafted steps that a company intends to follow

What is a fragmented industry?

- The largest rivals control just a small fraction of the business and that a large number of companies are important participants - Ex. the restaurant industry

What is an organization's vision statement?

- Their hopes of what they become in the future - This statement clearly articulates an organization's aspirations

What is an organization's mission statement?

- Their reason for their existence - Effectively capture an organization's identity and provide answers to the fundamental question "Who are we?"

Why are capabilities important?

- They are how a company captures the potential value that resources offer. - Ex. Southwest employees offering excellent customer service because of their company culture

Capabilities are _______.

- What the organization can do based on the resources it possesses - They are needed to bundle, to manage, and otherwise to exploit resources in a manner that provides value added to customers and creates advantages over competitors

How to earn a patent:

- You must prove that an invention is new, non-obvious, and useful - The owner of a patent can sue for damages if they believe one has infringed on it

4 types of CEOS:

1. Icons 2. Scoundrels 3. Hidden gems 4. Silent Killers

4 types of intellectual property:

1. Patents 2. Copyrights 3. Trademarks 4. Trade Secrets

Two important considerations for assessing performance:

1. Performance measures 2. Performance referents

What are Dr. Harry Mintzberg's Five P's?

1. Plan 2. Ploy 3. Patter 4. Position 5. Perspective

What are the 4 P's of the marketing mix?

1. Product 2. Place 3. Price 4. Promotion

What two pivotal events firmly established strategic management as a field of study in 1980?

1. The creation of the Strategic Management Journal 2. The publication of Michael Porter's book called Competitive Strategy: Techniques for Analyzing Industries and Competitors

Current ratio: a ratio of less than _____ suggests the firm does not have enough cash to pay the bills.

1.0

What is a performance referent?

A benchmark used to make sense of an organization's standing along a performance measure

What are economies of scale?

A cost advantage created when a company can produce a good or service at a lower per unit price due to producing the good or service in large quantities Ex. Papa John's purchasing power and ability to provide fast, better tasting pizza than most consumers can make

What is a performance measure?

A metric, such as a stock price, sales, or profits upon which an organization can be gauged

What is a valuable resource?

A resource that helps a company create strategies that capitalize on opportunities and ward off threats Ex: Southwest Airlines' company culture

Strategy as a ploy is ________.

A specific move used to outwit or trick competitors; they involve using creativity to enhance success Ex. Post saying coffee was bad for children to support sales of their breakfast drink

What is Michael Porter's Five Forces Analysis?

A technique for examining an industry by examining the interactions among competitors in an industry, potential new entrants, substitutes for the industry's offerings, suppliers for the industry, and the industry's buyers

What did Professor Robert Kaplan and Professor David Norton of Harvard University develop?

A tool called the Balanced Scorecard

What is a PESTEL analysis?

A way for executives to organize factors in the external environment and identify how these factors can influence the companies within them

What is a Triple Bottom Line?

An approach to assessing performance that focuses on the 3 P's of people: - People - Planet - Profit

What is the Balanced Scorecard?

An approach to assessing performance that targets manager's attention on four areas: 1. Financial 2. Customer 3. Internal business process 4. Learning and growth The idea is to find a balance between financial measures and other factors that contribute to a firm's long-term success

What is a strategic resource?

An asset that is valuable, rare, difficulty to imitate, and non-substitutable

What is an industry?

An environment where multiple organizations compete with each other by providing similar goods or services

Resources that are valuable, rare, difficulty to imitate, and non-substitutable are likely to _______.

Create a sustained competitive advantage, one that will endure over time and help the company remain profitable into the future

What is intellectual property?

Creations of the mind, such as inventions, artistic products, and symbols

What are threats?

Events and trends that may undermine a company's performance

What are opportunities?

Events and trends that provide an opportunity to improve an organization's performance level

Strategy as a position ________.

Examines a company's place in an industry relative to its competitors

Strategic management ________.

Examines how actions and events involving top executives, firms, and industries influence a firm's success or failure

Copyrights provide _______.

Exclusive rights to the creators of original artistic work such as books, music, movies, songs, and screenplays

Strategy as a pattern ________.

Focuses on extent to which firm's actions are consistent over time

What university became the first higher education institution to offer a course focused on how business executives could lead their organizations to greater success?

Harvard University (1912)

What does resource-based theory suggest?

It suggest that resources that are valuable, rare, difficult to imitate, and non-substitutable best position a company for long-term success.

What is the Art of War?

It's an ancient Chinese military treatise written by Sun Tzu and it emphasizes the creative and deceptive aspects of strategy

Net income (income after taxes)

Last year's net income - an increase shows the firm's profits are moving in the right direction

What are patents?

Legal decrees that protect inventions from direct imitation for a limited period of time

What are 3 P's of people about?

Making sure that the actions of an organization are socially responsible and that the organization operates in a way that promotes environmental sustainability in its quest to make a profit

What are goals?

Narrower aims that organizations pursue to serve their visions and missions

What are substitutes?

Offerings that differ from the goods and services provided by the competitors in an industry but that fill similar needs to what the industry offers

What is rare resource?

One that is considered unique when contrasted with the resources of competitors

What does an environment provide organizations with?

Opportunities and threats

What is a general environment (macro environment)

Overall trends and events in society such as social trends, technological trends, demographics and economics

Mastering strategic management is both ________.

Part art and science Formal tools exist for examining these relationships, however creativity is just as important

A deliberate strategy is ________.

Parts of the intended plan that an organization continues to pursue over time

Difference between resources and capabilities:

Resources refer to what an organization owns, capabilities refer to what the organization can do

What are intangible resources?

Resources that are difficult to quantify such as knowledge and skills of employees, a company's reputation, culture, etc.

What are tangible resources?

Resources that can be easily seen, touched, and quantified. (property and plant assets, cash, equipment)

The most effective goals are those that are ________.

SMART - Specific - Measurable - Agressive - Realistic - Time-bound

Poor strategic leaders

Struggle to rally their people and channel their collective energy in a positive direction

What was the goal of Harvard's business policy course?

The goal was to identify the one best response to any given problem that an organization confronted, which would then get them the best chance of enjoying success

What does an organization need in order to prosper?

Support from their key stakeholders, such as employees, owners, suppliers, and customers

What is Moore's Law?

Technology changes every two years

Where is the earliest know discussion of strategy found?

The Old Testament of the Bible

What is the most famous example of strategy in ancient times?

The Trojan horse strategy - gestures that appear on the surface to be beneficial to the recipient but masks a sinister intent

What are intellectual property rights?

The ability of an organization to protect intangible goods, such as movies, software, and video games from piracy

What implication for strategic management was offered by King Arthur and his Knights of the Round Table involve?

The concept of mission - their search for the Holy Grail shows us the importance of a central mission to guide organizational strategy and actions

What is one of Sun Tzu's best ideas?

Winning a battle without fighting is the best way to win Ex. Rather than fighting a battle with other firms, Apple wins within the computer business by creating its own unique market and by attracting a set of loyal customers