GEB 4891 Chapter 2 Quiz
Which of the following is NOT an example of a financial objective?
Achieve a market share of nine percent. Correct. According to the Balanced Scorecard depicted in Table 2.4, capturing market share is a strategic objective, while bond ratings, growth in earnings per share, revenue growth, and increases in returns on equity are all financial objectives.
Which of the following is NOT an example of a strategic objective?
Boost internal cash flows by seven percent to fund new research and development activities. Correct. According to the Balanced Scorecard depicted in Table 2.4, boosting internal cash flows for reinvestment purposes, such as R&D, is a financial objective, while new product introductions, reduction of product development cycle time, improving information technology, improving teamwork, and increases in returns on equity are all strategic objectives.
The task of top executives when the company faces disruptive changes in its environment is to not only raise questions about the appropriateness of its direction and strategy, but also to
ferret out the causes and decide when adjustments are needed and what adjustments are needed for improved performance and operating excellence. Correct. Top-notch strategy execution entails vigilantly searching for ways to improve and then making corrective adjustments whenever and wherever it is useful to do so.
A company needs performance targets or objectives
for its operations as a whole and also for each of its separate businesses, product lines, functional departments, and individual work units. Correct. Objective setting should not stop with top management's establishing of companywide performance targets. Company objectives need to be broken down into performance targets for each of the organization's separate businesses, product lines, functional departments, and individual work units. Employees within various functional areas and operating levels will be guided much better by specific objectives relating directly to their departmental activities than broad organizational-level goals.
The benefit of a vivid, engaging, and convincing strategic vision is NOT its ability to
help company personnel understand the logic of the company's business model. Correct. A well-thought-out, forcefully communicated strategic vision pays off in several respects: (1) It crystallizes senior executives' own views about the firm's long-term direction; (2) It reduces the risk of rudderless decision-making by management at all levels; (3) It is a tool for winning the support of employees to help make the vision a reality; (4) It provides a beacon for lower-level managers in forming departmental missions; and (5) It helps an organization prepare for the future.
The managerial task of developing a strategic vision for a company
involves deciding upon what strategic course a company should pursue in preparing for the future and why this directional path makes good business sense. Correct. The real purpose of a vision statement is to serve as a management tool for giving the organization a sense of direction. A strategic vision delineates management's aspirations for the business, providing a panoramic view of "where we are going" and a convincing rationale for why this makes good business sense for the company. A strategic vision thus points an organization in a particular direction, charts a strategic path for it to follow, builds commitment to the future course of action, and molds organizational identity. A clearly articulated strategic vision communicates management's aspirations to stakeholders (customers, employees, stockholders, suppliers, etc.) and helps steer the energies of company personnel in a common direction.
Which of the following is the best example of a well-stated financial objective?
Increase earnings per share by 15 percent annually. Correct. Common financial objectives are: an x percent increase in annual revenues; annual increases in after-tax profits of x percent; annual increases in earnings per share of x percent; annual dividend increases of x percent; profit margins of x percent; an x percent return on capital employed (ROCE) or return on shareholders' equity (ROE) investment; increased shareholder value in the form of an upward-trending stock price; bond and credit ratings of x; internal cash flows of x dollars to fund new capital investment.
Which of the following is the best example of a well-stated strategic objective?
Overtake key competitors on product performance or quality within three years. Correct. Common strategic objectives are: winning an x percent market share; achieving lower overall costs than rivals; overtaking key competitors on product performance, quality, or customer service; deriving x percent of revenues from the sale of new products introduced within the past five years; having broader or deeper technological capabilities than rivals; having a wider product line than rivals; having a better-known or more powerful brand name than rivals; having stronger national or global sales and distribution capabilities than rivals; consistently getting new or improved products to market ahead of rivals.
Why should long-run objectives take precedence over short-run objectives?
The focus is placed on improving performance in the near term. Correct. Long-term objectives serve as a barrier to an undue focus on short-term results by nearsighted management. When trade-offs have to be made between achieving long- and short-run objectives, long-run objectives should take precedence (unless the achievement of one or more short-run performance targets has unique importance).
What a company's top executives are saying about where the company is headed long term with respect to its future product-market-customer-technology mix
constitutes the strategic vision for the company. Correct. Top management's views about the company's direction and future product-customer-market-technology focus constitute a strategic vision for the company. A clearly articulated strategic vision communicates management's aspirations to stakeholders about "where we are going" and helps steer the energies of company personnel in a common direction.
Which of the following most accurately describes the task of crafting a company's strategy?
The more a company's operations cut across different products, industries, and geographical areas, the more that headquarters executives have little option but to delegate considerable strategy-making authority to down-the-line managers in charge of particular subsidiaries, product lines, geographic sales offices, and plants. Correct. Strategy making is by no means solely a top management function, the exclusive province of owner-entrepreneurs, CEOs, high-ranking executives, and board members. The more a company's operations cut across different products, industries, and geographic areas, the more that headquarters executives have little option but to delegate considerable strategy-making authority to down-the-line managers in charge of particular subsidiaries, divisions, product lines, geographic sales offices, distribution centers, and plants.
In a diversified company, the strategy-making hierarchy consists of
corporate strategy, business strategies, functional strategies, and operating strategies. Correct. In diversified companies like GE, where multiple and sometimes strikingly different businesses have to be managed, crafting a full-fledged strategy involves four distinct types of strategic actions and initiatives. Each of these involves different facets of the company's overall strategy—corporate, business, functional-area, and operating—and calls for the participation of different types of managers.
A company's strategic vision concerns
a company's directional path and future product-customer-market-technology focus. Correct. A strategic vision delineates management's aspirations for the business, providing a panoramic view of "where we are going" and a convincing rationale for why this makes good business sense for the company. A strategic vision thus points an organization in a particular direction, charts a strategic path for it to follow, builds commitment to the future course of action, and molds organizational identity. A clearly articulated strategic vision communicates management's aspirations to stakeholders (customers, employees, stockholders, suppliers, etc.) and helps steer the energies of company personnel in a common direction.
The difference between the concept of a company mission statement and the concept of a strategic vision is that
a mission statement typically concerns a company's purpose and its present business scope, whereas the principal concern of a strategic vision is a company's aspirations for its future. Correct. The defining characteristic of a strategic vision is what it says about the company's future strategic course—"the direction we are headed and the shape of our business in the future." It is aspirational. In contrast, a mission statement describes the enterprise's present business and purpose—"who we are, what we do, and why we are here."
Business strategy, as distinct from corporate strategy, is chiefly concerned with
deciding how to build competitive advantage and improve performance in a particular line of business. Correct. Business strategy is concerned with strengthening the market position, building competitive advantage, and improving the performance of a single line of business unit.
Which of the following principal aspects should be included in managing the strategy execution process?
organizing the company along the lines of best practice Correct. In most situations, managing the strategy execution process includes the following principal aspects: creating a strategy-supporting structure; staffing the organization to obtain needed skills and expertise; developing and strengthening strategy-supporting resources and capabilities; allocating ample resources to the activities critical to strategic success; ensuring that policies and procedures facilitate effective strategy execution; organizing the work effort along the lines of best practice; installing information and operating systems that enable company personnel to perform essential activities; motivating people and tying rewards directly to the achievement of performance objectives; creating a company culture conducive to successful strategy execution; and exerting the internal leadership needed to propel implementation forward.
A company's strategic plan
outlines the competitive moves and approaches to be used in achieving the desired business results. Correct. A strategic plan maps out where a company is headed, establishes strategic and financial targets, and outlines the competitive moves and approaches to be used in achieving the desired business results.
Perhaps the most reliable way for a company to improve its financial performance over time is to
recognize that the achievement of strategic objectives signals that the company is well positioned to sustain or improve its performance. Correct. The best and most reliable leading indicators of a company's future financial performance and business prospects are strategic outcomes that indicate whether the company's competitiveness and market position are stronger or weaker. The accomplishment of strategic objectives signals that the company is well positioned to sustain or improve its performance.
Strategic intent refers to a situation where a company
relentlessly pursues an ambitious strategic objective. Correct. A company exhibits strategic intent when it relentlessly pursues an ambitious strategic objective, concentrating the full force of its resources and competitive actions on achieving that objective.
A "balanced scorecard" for measuring company performance
strikes a "balance" between financial and strategic objectives. Correct. The Balanced Scorecard is a widely used method for combining the use of both strategic and financial objectives, tracking their achievement, and giving management a more complete and balanced view of how well an organization is performing.