Management: A Practical Approach, Chapter 6
Explain the three core processes of business and how they relate to execution
A company's overall ability to execute is a function of effectively executing in terms of its people processes, strategic processes, and operational processes. People process: An effective leader tries to evaluate talent by linking people to particular strategic milestones, developing future leaders, dealing with nonperformers, and transforming the mission and operations of the human resource department. Strategic processes: A good strategic plan addresses nine questions. In considering whether the organization can execute the strategy, a leader must take a realistic and critical view of its capabilities and competencies. Operations processes: The strategy process defines where an organization wants to go, and the people process defines who's going to get it done. Operations or the operating plan provides the path for people to follow. The operating plan should address all the major activities in which the company will engage and then define short-term objectives for these activities, to provide targets for people at which to aim.
When analyzing the "T" in SWOT analysis, a manager might take note of
A competitor's new product. - A competitor's new product may be a threat if it is likely to capture market share.
Which of the following is most likely to use a diversification strategy?
A grocery store - Diversification strategy means operating several businesses in order to spread the risk. A grocery store sells food, toiletries, pharmaceuticals, cards, flowers, and often more.
Faisal has been running a commercial real estate business for nearly 30 years
As he approaches retirement, he is content to simply lease the commercial space he currently has, rather than make new deals to develop additional properties. Faisal is using which grand strategy?. Stability - A stability strategy is a grand strategy that involves little or no significant change.
Which of the following is not one of Bryan Barry's recommendations to keep a strategic plan on track?
Avoid compromise. - To keep a strategic plan on track, suggests Bryan Barry, you need to do the following: Engage people. Keep it simple. Stay focused. Keep moving.
An example of a firm that pursues a differentiation strategy is
Bic. - The differentiation strategy is to offer products or services that are of unique and superior value compared to those of competitors but to target a wide market. Because products are expensive, managers may have to spend more on R&D, marketing, and customer service. This is the strategy followed by Ritz-Carlton hotels and the makers of Lexus automobiles.
Which of the following statements about strategic planning and strategic management is true?
Both should be implemented because they can provide direction and momentum. - There are three reasons why an organization should adopt strategic management and strategic planning: (1) to provide direction and momentum, (2) to encourage new ideas, and above all (3) to develop a sustainable competitive advantage.
Define competitive intelligence and explain how you might go about obtaining it legally
Competitive intelligence means gaining information about one's competitors' activities so that one can anticipate their moves and react appropriately. Gaining competitive intelligence isn't always easy, but there are several avenues and most of them are public sources including (1) the public prints and advertising, (2) investor information like corporate annual reports, and (3) informal sources such as trade show gossip and information from company salespeople.
Gaining information about one's competitors' activities so that you can anticipate their moves and react appropriately is called
Competitive intelligence. - Practicing competitive intelligence means gaining information about one's competitors' activities so that you can anticipate their moves and react appropriately.
Describe what determines competitiveness within a particular industry using Porter's model for industry analysis. Provide an example for at least three of the five forces in the model
Competitiveness within a particular industry originates in the five primary competitive forces in the firm's environment: 1. Threats of new entrants: for Kraft, new entrants might be store brands or Annie's. 2. Bargaining power of suppliers: companies without multiple suppliers are at the mercy of the one. 3. Bargaining power of buyers: customers who use the Internet to shop around are more able to negotiate a better price. 4. Threats of substitute products or services: for big oil companies, firms making ethanol provide a substitute product. 5. Rivalry among competitors: for Coca-Cola, Pepsi is an established rival.
Which of the following is not a likely source of information for competitive intelligence?
Competitor's customer records - Gaining competitive intelligence isn't always easy, but there are several avenues and, surprisingly, most of them are public sources including the public prints and advertising, investor information, and informal sources. A competitor's customer records are not available publicly, nor would they yield much information about upcoming plans.
Which of the following is not a stage in the strategic-management process?
Conduct a trend analysis. - The steps of the strategic-management process are establishing the mission and vision, establishing the grand strategy, formulating the strategic plans, carrying out the strategic plans and maintaining strategic control (see Figure 6.1).
After film manufacturer Kodak failed to reinvent itself and declared bankruptcy in 2012, it decided to focus on its business of making inkjet printers as part of a ______ strategy
Defensive - A defensive strategy or a retrenchment strategy, is a grand strategy that involves reduction in the organization's efforts. In variations of this strategy, it can declare bankruptcy or gradually phase out product lines or services.
Computer technology corporation Dell recently acquired Quest software, an IT management software provider, in order to expand upon its software expertise and offerings
Dell is pursuing a(n) ______ strategy. growth - A growth strategy is a grand strategy that involves expansion, as in expanding sales revenues, market share, number of employees, or number of customers or (for nonprofits) clients served. In a variation of this strategy, it can acquire similar or complementary businesses.
Which of the following is not an area in which a company needs to get and stay ahead in order to sustain a competitive advantage?
Employees - Sustainable competitive advantage occurs when an organization is able to get and stay ahead in four areas: (1) in being responsive to customers, (2) in innovating, (3) in quality, and (4) in effectiveness.
Careful monitoring of an organization's internal and external environment to detect early signs of opportunities and threats that may influence the firm's plans is called
Environmental scanning. - Environmental scanning is careful monitoring of an organization's internal and external environments to detect early signs of opportunities and threats that may influence the firm's plans.
A business plan is a document with the purpose of outlining a proposed firm's profit and loss statements for its first operating cycle
FALSE - A business plan is a document that outlines a proposed firm's goals, the strategy for achieving them, and the standards for measuring success.
A company must be able to execute three core processes of business including people products and administration
FALSE - A company's overall ability to execute is a function of effectively executing according to three processes: people, strategy, and operations
After the assessment of current organizational performance, the subsequent explanation of how its mission is to be accomplished is called a comprehensive strategy
FALSE - A grand strategy, after an assessment of current organizational performance, explains how the organization's mission is to be accomplished.
A development strategy is the common grand strategy that involves expansion
FALSE - A growth strategy is a grand strategy that involves expansion, as in sales revenues, market share, number of employees, or number of customers or (for nonprofits) clients served.
A small florist most likely follows a diversification strategy
FALSE - A single-product strategy is followed by the small florist who sells only one product within its market.
A continuity strategy is the common grand strategy that involves little or no significant change
FALSE - A stability strategy is a grand strategy that involves little or no significant change.
Contingency planning is a hypothetical extension of a past series of events into the future
FALSE - A trend analysis is a hypothetical extension of a past series of events into the future.
A vision will be demoralizing to employees if it describes a future state that appears beyond the reach of the organization
FALSE - A vision should be positive and inspiring, and it should stretch the organization and its employees to achieve a desired future state that appears beyond its reach.
The starting point in establishing a grand strategy is usually an analysis of Porter's competitive forces
FALSE - Among the techniques used in strategy formulation, rather than a grand strategy, is Porter's competitive forces and strategies.
Bad planning is usually a result of top managers' inability to gather enough information
FALSE - Bad planning usually results from faulty assumptions about the future, poor assessment of an organization's capabilities, ineffective group dynamics, and information overload.
In a world of rapid and discontinuous change, the ability to please nonmanagerial employees has been called the golden trait among managers
FALSE - Because of fast-spreading world conditions, such as the threat of products becoming commodities, rapidly increasing productivity, and global overcapacity, managers must be able to make difficult decisions. The writer Geoffrey Colvin puts it as, "The future will demand ever more people with the golden trait, the fortitude to accept and even seek psychic pain."
Managers who execute well insist on constant optimism
FALSE - Bossidy and Charan propose that there are seven essential types of leader behaviors that are needed to fuel the engine of execution. Insisting on realism is among them. Many people want to avoid or shade reality, hiding mistakes or avoiding confrontations. Making realism a priority begins with the leaders being realistic themselves, and making sure realism is the goal of all dialogues in the organization
According to Burt Nanus, good vision statements are useful because they help people to consider all interesting elements in their environments
FALSE - Burt Nanus says that a good vision statement helps align people's energies in a common direction, and prevents people from being overwhelmed by immediate problems because the vision statement helps distinguish what is truly important from what is merely interesting.
A good vision statement should describe a company's major strengths and competitive advantage in its industry
FALSE - Descriptions of major strengths and competitive advantage should be included in a mission statement. See Table 6.1.
Obsolete technology and outdated facilities are examples of organizational threats
FALSE - Does your organization have obsolete technology? outdated facilities? a shaky marketing operation? These are examples of organizational weaknesses, the drawbacks that hinder an organization in executing strategies in pursuit of its mission.
Formal business plans can be dangerous to the survival of new businesses; many who try them fail because of the resources required to write and agree upon the plan
FALSE - Evidence suggests that firms with formal business plans are more apt to survive. For example, research examined 396 entrepreneurs in Sweden and found that a greater number of firms that failed never had a formal business plan.
Execution is tactical in nature, rather than part of a company's strategy
FALSE - Execution is not simply tactics; it is a central part of any company's strategy. It consists of using questioning, analysis, and follow-through to mesh strategy with reality, align people with goals, and achieve results promised.
A mission statement should be ambitious
FALSE - Good vision statements are typically ambitious. See Table 6.1.
The use of hedging to manage the cost of aviation fuel is an example of trend analysis
FALSE - In the past several years, Southwest Airlines has been able to effectively use hedging to hold down its costs for aviation fuel. This is an example of contingency planning.
Strategic planning is appropriate for large companies, but does not help the performance of small companies
FALSE - One analysis of several studies found that strategic planning was appropriate not just for large firms. Companies with fewer than 100 employees could benefit as well, although the improvement in financial performance was small.
The primary purpose of competitive intelligence is to challenge the thinking of employees to make them better equipped to produce novel ideas for business
FALSE - Practicing competitive intelligence means gaining information about one's competitors' activities so that you can anticipate their moves and react appropriately. If you are a manager, one of your worst nightmares is that a competitor will surprise you with a service or product.
Strategy actualization is the term for putting strategic plans into effect
FALSE - Putting strategic plans into effect is strategy implementation.
Planning is usually a straightjacket for new ideas, since it effectively blocks peripheral vision in favor of a predetermined course
FALSE - Some people object that planning can foster rigidity, that it creates blinders that block out peripheral vision and reduces creative thinking and action. Actually, far from being a straitjacket for new ideas, strategic planning can help encourage them by stressing the importance of innovation in achieving long-range success.
Strategic management is the process of involving nonmanagerial employees in the formulation and implementation of strategies and strategic goals
FALSE - Strategic management is a process that involves managers from all parts of the organization in the formulation and the implementation of strategies and strategic goals.
A strategic position may be based on serving the few needs of a few customers
FALSE - Strategic position emerges from three sources: Few needs and many customers, broad needs and few customers, and lastly, broad needs and many customers.
Strategic conservation attempts to achieve sustainable competitive advantage by preserving what is distinctive about a company
FALSE - Strategic positioning attempts to achieve sustainable competitive advantage by preserving what is distinctive about a company.
In Porter's model for industry analysis, there are three primary competitive forces in a firm's environment
FALSE - Strategic-management expert Michael Porter suggested in his Porter's model for industry analysis that business-level strategies originate in five primary competitive forces in the firm's environment: (1) threats of new entrants, (2) bargaining power of suppliers, (3) bargaining power of buyers, (4) threats of substitute products or services, and (5) rivalry among competitors.
Good strategy allows a company to be everything to everyone
FALSE - Strategy requires trade-offs in competing. Some strategies are incompatible. Thus a company has to choose not only what strategy to follow but what strategy not to follow.
Synergy is one of the benefits of a single-product strategy
FALSE - Synergy is characteristic of a related diversification strategy. The concept of synergy is that the economic value of separate, related businesses under one ownership and management is greater together than the businesses are worth separately.
The BCG matrix is a means of evaluating strategic business units on the basis of both their business growth rates and their profitability
FALSE - The BCG matrix is a means of evaluating strategic business units on the basis of (1) their business growth rates and (2) their share of the market.
In a cost-leadership strategy, an organization targets a wide market and offers products or services of unique and superior value compared to competitors
FALSE - The cost-leadership strategy is to keep the costs, and hence prices, of a product or service below those of competitors and to target a wide market. The differentiation strategy is to offer products or services that are of unique and superior value compared with those of competitors but to target a wide market.
The first step of the strategic-management process is to establish the grand strategy
FALSE - The first step of the strategic-management process is to establish the mission and the vision.
One of the ways to keep a strategic plan on track is to make it very comprehensive, covering as many scenarios for the future as you can
FALSE - To keep a strategic plan on track, you need to engage people, keep it simple, stay focused, and keep moving toward your vision of the future.
Two types of forecasting are trend analysis and competitive intelligence
FALSE - Two types of forecasting are trend analysis and contingency planning.
Ford's Sync in-dash communications platform, despite its high level of technology, has been unable to provide the company with a distinct competitive advantage
FALSE -"Right now (using Sync)," says an automotive analyst, "Ford has redefined this market, and it has made it very difficult for anybody to enter the space and compete." In other words, Sync is a distinct competitive advantage for the car company, at least so far.
When analyzing the "O" in SWOT analysis, a manager might take note of
Favorable government regulations. - A manager may be able to discover an opportunity in favorable government regulations.
Which of the following carmakers pursues a focused-differentiation strategy?
Ferrari - The focused-differentiation strategy is to offer products or services that are of unique and superior value compared to those of competitors and to target a narrow market.
Which of the following statements about strategy and strategic positioning is false?
Few customers with narrow needs can be a source of strategic position. - Three key principles underlie strategic positioning: (1) strategy is the creation of a unique and valuable position which emerges from three sources (few needs and many customers, broad needs and few customers, broad needs and many customers). (2) Strategy requires trade-offs in competing; a company has to choose not only what strategy to follow but what strategy not to follow. (3) Strategy involves creating a "fit" among activities.
Which of the following should be included in a good vision statement?
Firm's standards of excellence and high ideals. - Good vision statements should set standards of excellence and reflect high ideals (see Table 6.1).
The benefit of the single-product strategy for a company is
Focus. -Making just one product allows you to focus your manufacturing and marketing efforts just on that product. This means that your company can become savvy about repairing defects, upgrading production lines, scouting the competition, and doing highly focused advertising and sales.
Define forecasting and discuss its importance. Describe the two types of forecasting described in the text
Forecasting is developing a vision or projection of the future, which is a necessary component of strategic planning. The two types are trend analysis and contingency planning. Trend analysis is a hypothetical extension of a past series of events into the future. Contingency planning is the creation of alternative hypothetical but equally likely future conditions.
General Electric sells lighting products and is also involved in plastics, broadcasting, and financial services
GE uses a related diversification strategy. FALSE - Unrelated diversification means operating several businesses under one ownership that are not related to one another. GE, which began by making lighting products, diversified into such unrelated areas as plastics, broadcasting, and financial services.
Which of the following best represents a currently popular strategy among big companies like Apple, Google, and Amazon?
Get consumers tightly connected to the company's ecosystem. - With big companies, especially big-tech companies such as Amazon, Google, or Apple, the strategy is to get consumers tied not just to a brand or device or platform but to make them captive of the company's ecosystem and to get them connected "as tightly as possible so they and their content are locked into one system," says analyst Michael Gartenberg.
Alexis has prepared a report that details how prices for several raw materials her firm uses in production have risen by up to 30% in the last year
Her report would be an input into the __________ part of a SWOT analysis. threats - Rising costs for raw materials in an external threat to a company.
An organization is developing a low-cost line of environmentally friendly cleaning products that it intends to distribute internationally
Here, the organization is following a ______ strategy. cost leadership - The cost-leadership strategy is to keep the costs, and hence prices, of a product or service below those of competitors and to target a wide market.
When analyzing the "W" in SWOT analysis, a manager might take note of
High turnover of employees. - High turnover of employees is an internal matter that is a weakness.
Which of the following is not a question that Bossidy and Charan believe a strong strategic plan must address
How will deviations from the plan be handled? - According to Bossidy and Charan, a strong strategic plan addresses nine questions, among them: What is the assessment of the external environment? What are the critical issues facing the business? Can the business execute the strategy? Are the short term and long term balanced?
Explain the positive and negative aspects of pursuing a single-product strategy versus a diversification one. Provide an example of a company that uses each type of strategy
In a single-product strategy, a company makes and sells only one product within its market. Making just one product allows you to focus your manufacturing and marketing efforts just on that product. This means that your company can become savvy about repairing defects, upgrading production lines, scouting the competition, and doing highly focused advertising and sales. The risk, of course, is that if you do not focus on all aspects of the business, if a rival gets the jump on you, or if an act of God intervenes (for a florist, roses suffer a blight right before Mother's Day), your entire business may go under. The single-product strategy is seen all the time as you drive past the small retail businesses in a small town: There may be one shop that sells only flowers, one that sells only security systems, and so on. Diversification is operating several businesses in order to spread the risk. Diversification may be related or unrelated. Related diversification has three advantages: reduced risk—because if one product is weak, others may take up the slack, management efficiencies—because administration is spread over several businesses, and synergy, that the sum is greater than the parts. You see the diversification strategy at the small retailer level when you drive past a store that sells gas and food and souvenirs and rents DVD movies.
Milo owns and manages a small bike repair store
In order to determine if strategic planning will be likely to help his business, Milo should primarily assess. how many competitors he has. - Strategic planning is not likely to result in a significant improvement unless Milo is in a highly competitive industry.
Which of the following is not a typical cause of bad planning?
Inadequate planning budgets. - Bad planning usually results from faulty assumptions about the future, poor assessment of an organization's capabilities, ineffective group dynamics, and information overload.
High Peaks Skate and Snowboard is a small shop that provides equipment for Utah snowboarders in winter months
It has decided to increase advertising during this period in the Salt Lake Tribune and the Park Record in Park City, as well as to sponsor a new on-mountain competition. It is following which strategy?. Growth - A growth strategy is a grand strategy that involves expansion, as in expanding sales revenues, market share, number of employees, or number of customers or (for nonprofits) clients served. In a variation of this strategy, it can increase its promotion and marketing efforts to try to expand its market share.
An Iowa ethanol production company has been suffering from a combination of lower demand for gasoline (into which its product is mixed) and higher corn prices (which is the largest input cost)
It has responded by selling off land, buildings, and some of its reserve product inventory. This is a variation of which of these grand strategies?. Defensive - A defensive strategy or a retrenchment strategy, is a grand strategy that involves reduction in the organization's efforts. In a variation of this strategy, it can sell off (liquidate) assets like land, buildings, inventories, and the like.
Which of the following steps of the strategic-management process is the source of its feedback loop?
Maintain strategic control. - The feedback loop, which provides an opportunity to revise actions, originates at the final step of the strategic-management process, to maintain strategic control (see Figure 6.1).
Effective strategic management involves
Managers from all parts of the organization. - Strategic management is a process that involves managers from all parts of the organization in the formulation and the implementation of strategies and strategic goals. Precisely because middle and first-line managers are the ones who will be asked to understand and implement the strategies, they should also help to formulate them.
Recently ConocoPhillips, America's third-biggest oil company, spun off its refineries, pipelines, and chemicals division to form a new company called Phillips 66
Now ConocoPhillips will concentrate on its upstream operations. This is a variation of which of these grand strategies?. Defensive - A defensive strategy or a retrenchment strategy, is a grand strategy that involves reduction in the organization's efforts. In a variation of this strategy, it can divest part of its business, as in selling off entire divisions or subsidiaries.
Daniel is assessing his company's portfolio of products
One of them is the best-selling brand of mayonnaise, although this is now a slow-growing market. If Daniel uses the BCG matrix, he would classify this product as a. cash cow. - In the BCG matrix, cash cows have slow growth but high market share, and income from them often finances stars and question marks.
Analysis of changing demographics of the US. population would be part of the assessment of a company's.
Opportunities or threats depending on the outcome of the analysis. - Changing demographics may be either an opportunity or a threat in the environment. For example, the aging population may help some firms but hurt others.
According to Bossidy and Charan, which business process is most important for effective execution?
People - A company's overall ability to execute is a function of effectively executing according to three processes: people, strategy, and operations. Because all work ultimately entails some human interaction, effort, or involvement, Bossidy and Charan believe that the people process is the most important.
Describe Porter's four competitive strategies and explain how they differ from each other. Provide an example of a firm that might use each
Porter identified two "wide" strategies (cost-leadership and differentiation) that deal with broad markets, and two "narrow" strategies (cost-focus and focused-differentiation) that target specific markets. 1. Cost-leadership focuses on keeping costs and prices low for a wide market, and examples are Dell, Timex, Home Depot, and Bic. 2. Differentiation stresses offering unique and superior products and services to a wide market and examples include Ritz-Carlton, Lexus, and PepsiCo. 3. Cost-focus emphasizes keeping low costs and prices, but to a narrow market and examples include low-cost products sold at discount store and discount regional gas station chains. 4. Focused-differentiation stresses unique and superior products to a narrow market and examples include Rolls Royce, Cartier, Turnbull & Asser, and niche books.
Bossidy and Charan believe that to excel at execution, a leader should
Probe for weaknesses in the substance and details. -Bossidy and Charan point out, "The leader who boasts of her hands-off style or puts her faith in empowerment is not dealing with the issues of the day. Leading for execution is not about micromanaging. Leaders who excel at execution immerse themselves in the substance of execution and even some of the key details. They use their knowledge of the business to constantly probe and question. They bring weaknesses to light and rally their people to correct them."
Explain strategy implementation, including the role of resistance
Putting strategic plans into effect is strategy implementation. Strategy implementation is the stage of the strategic management process where managers determine possible roadblocks within the organization and see if the right people and control systems are available to execute the plans. Resistance may be encountered when people feel the plans threaten their livelihoods or their influence. This is especially true when plans are being implemented quickly, as delays (a form of resistance) can easily be constructed and these delays may heavily damage a plan. Thus, top managers can't just announce the plans
Which of the following is not a behavior of a leader who executes
Respect others' limitations. - According to Bossidy and Charan, there are seven essential leader behaviors that fuel the engine of execution. Rather than understand their limitations, you should expand people's capabilities.
What are the fundamental differences in examining internal and external environments when conducting a situation analysis?
SWOT analysis, also called a situation analysis, looks at internal strengths and weaknesses and external opportunities and threats. The internal environment looks at organizational strengths—the skills and capabilities that give the organization special competencies and competitive advantages in executing strategies in pursuit of its mission, and organizational weaknesses—the drawbacks that hinder an organization in executing strategies in pursuit of its mission—are also part of the internal environment. The external environment includes organizational opportunities—environmental factors that the organization may exploit for competitive advantage. It also includes organizational threats—environmental factors that hinder an organization's achieving a competitive advantage.
A situational analysis is also known as
SWOT analysis. - SWOT analysis, also known as a situational analysis, is a search for the strengths, weaknesses, opportunities, and threats affecting the organization.
Give examples of what managers might look at in performing each element of a SWOT analysis
SWOT analysis—also known as a situational analysis—is a search for the strengths, weaknesses, opportunities, and threats affecting the organization.Examples of a firm's strengths and weaknesses: work processes, organization, culture, staff, product quality, production capacity, image, financial resources and requirements, service levels, other internal matters. Examples of a firm's opportunities and threats: market segment analysis, industry and competition analysis, impact of technology on organization, product analysis, governmental impacts, other external matters (see Figure 6.2).
Consumers can use a national company called Service Magic to receive bids from quality providers of a variety of services, including home remodel, landscaping, plumbing, and housecleaning
Service Magic charges service providers for the leads it provides to them monthly. Which of the following is the source of Service Magic's strategic position?. Broad needs and many customers. - According to Porter, strategic positioning attempts to achieve sustainable competitive advantage by preserving what is distinctive about a company. "It means," he says, "performing different activities from rivals, or performing similar activities in different ways."
Amanda has just determined that her employees will require extensive training if they are to acquire the necessary technological expertise to produce a new product line
She has discovered one of her firm's. weaknesses. - The lack of technological expertise is a weakness of the organization.
______ consists of monitoring the execution of strategy and making adjustments, if necessary
Strategic control - Strategic control consists of monitoring the execution of strategy and making adjustments, if necessary.
__________ means performing different activities from rivals or performing similar ones in different ways
Strategic positioning - According to Porter, strategic positioning attempts to achieve sustainable competitive advantage by preserving what is distinctive about a company. "It means," he says, "performing different activities from rivals, or performing similar activities in different ways."
Define strategic positioning. Explain the three principles that underlie strategic positioning
Strategic positioning attempts to achieve sustainable competitive advantage by preserving what is distinctive about a company. It means, according to Porter, "performing different activities from rivals, or performing similar activities in different ways." Three key principles underlie strategic positioning: Strategy is the creation of a unique and valuable position, which emerges from three sources: few needs, many customers - broad needs, few customers - or broad needs, many customers. Strategy requires trade-offs in competing. A company has to choose not only what strategy to follow but what strategy not to follow. Strategy involves creating a "fit" among activities. "Fit" has to do with the ways a company's activities interact and reinforce one another.
The process of choosing among different strategies and altering them to best fit the organization is called
Strategy formulation. - Strategy formulation is the process of choosing among different strategies and altering them to best fit the organization's needs.
Actively selling strategic plans to middle and supervisory managers, rather than just announcing them, is helpful for
Strategy implementation. - Often strategy implementation means overcoming resistance by people who feel the plans threaten their influence or livelihood. Thus, top managers can't just announce the plans; they have to actively sell them to middle and supervisory managers.
A manager assessing the organization's access to capital is involved in analysis of
Strengths or weaknesses depending on the outcome of the assessment. - Access to capital may be either an internal strength or weakness, since some firms have this and others don't.
When analyzing the "S" in a SWOT analysis, a manager might take note of
Strong financial resources of the firm. - Strengths of a company can include financial resources and requirements, which are an internal factor.
__________ refers to the idea that the economic value of separate, related businesses under one ownership and management is greater together than the businesses are worth separately
Synergy - Synergy is the economic value of separate, related businesses under one ownership, and management is greater together than the businesses are worth separately.
A defensive strategy is sometimes called a retrenchment strategy
TRUE - A defensive strategy or a retrenchment strategy, is a grand strategy that involves reduction in the organization's efforts.
Alaska Airline was profitable in 2011, prompting is to decide to remain a "smallish, specialized, regional airline in a world of global giants," which is an example of a stability strategy
TRUE - A stability strategy is a grand strategy that involves little or no significant change. Example: Alaska Airlines, which enjoyed a profitable year in 2011, following a decade in which other carriers went bankrupt, decided to remain a "smallish, specialized, regional airline in a world of global giants," says one report, and to avoid cross-continental alliances and megamergers. Its stability strategy is simply to focus on lowering the cost per available seat mile.
A strategy is a large-scale action plan that sets direction for an organization
TRUE - A strategy is a large-scale action plan that sets the direction for an organization.
A sustainable competitive advantage is the ability of an organization to produce goods or services more effectively than its competitors and outperform them
TRUE - A sustainable competitive advantage is the ability of an organization to produce goods or services more effectively than its competitors do, thereby outperforming them.
A grand strategy can be established using tools like SWOT analysis and forecasting
TRUE - Among the strategic-planning tools and techniques used to establish a grand strategy are (1) SWOT analysis and (2) forecasting.
Burberry makes outerwear, accessories like umbrellas, and children's clothing, which is called a related diversification strategy
TRUE - An example of a related diversification strategy is the famous British raincoat maker Burberry. It started by making and marketing outerwear clothing but since then has expanded into related business lines, including accessories such as umbrellas, children's clothing, and even fragrances, which it sells in its own stores.
An organization should adopt strategic management and strategic planning to encourage new ideas
TRUE - An organization should adopt strategic management and strategic planning for three reasons: They can (1) provide direction and momentum, (2) encourage new ideas, and above all (3) develop a sustainable competitive advantage.
Insisting on realism is among the leader behaviors that help a manager successfully execute a strategy
TRUE - Bossidy and Charan propose that there are seven essential types of leader behaviors that are needed to fuel the engine of execution. Insisting on realism is among them. Many people want to avoid or shade reality, hiding mistakes or avoiding confrontations. Making realism a priority begins with the leaders being realistic themselves, and making sure realism is the goal of all dialogues in the organization.
Cash cows in the BCG matrix have slow growth but high market share
TRUE - Cash cows in the BCG matrix have slow growth but high market share, and income from them finances stars and question marks.
Harvard Business School professor Michael Porter is a leading authority on competitive strategy
TRUE - Certainly Michael Porter's status as a leading authority on competitive strategy is unchallenged. The Strategic Management Society, for instance, voted him the most influential living strategist.
Contingency planning can also be called scenario analysis
TRUE - Contingency planning, also known as scenario planning and scenario analysis, is the creation of alternative hypothetical but equally likely future conditions.
A single-product strategy can be described as focused but vulnerable
TRUE - In a single-product strategy, a company makes and sells only one product within its market. This allows you to focus your manufacturing and marketing efforts just on that product. The risk, of course, is that you are vulnerable if a rival gets the jump on you, or if an act of God intervenes, and your entire business may go under.
Many good mission statements include descriptions of an organization's customers, as well as its major products or services
TRUE - Mission statements may include information about customers and products or services.
Kraft Macaroni & Cheese is now challenged by new competitors such as Annie's and other store brands, which Porter's model for industry analysis calls the threat of new entrants
TRUE - New competitors can take away customers from existing organizations, which is called the threat of new entrants in the model. Example: Kraft Macaroni & Cheese is a venerable, well-known brand but is threatened from the low end by store brands, such as Walmart's brand, and from the high end by Annie's Creamy Macaroni and Cheese with Real Aged Wisconsin Cheddar.
A common challenge to strategy implementation is resistance by people within the organization
TRUE - Often implementation means overcoming resistance by people who feel the plans threaten their influence or livelihood. This is particularly the case when the plans must be implemented rapidly, since delay is the easiest kind of resistance there is.
Forecasting is a strategic-planning tool used to make long-term strategy
TRUE - Once they've analyzed their organization's Strengths, Weaknesses, Opportunities, and Threats, planners need to do forecasting for making long-term strategy. A forecast is a vision or projection of the future.
Managers must be willing to make large, painful decisions to suddenly alter strategy
TRUE - One of the lessons of successful managers is that they must be willing to make large, painful decisions to suddenly alter strategy.
Organizational threats are the environmental factors that hinder an organization's ability to achieve a competitive advantage
TRUE - Organizational threats are environmental factors that hinder an organization's achieving a competitive advantage.
Management of a small company in an industry that is not very competitive should not engage in strategic planning because the small gains in performance may not be worth the effort
TRUE - Research results indicate that for small companies strategic planning is probably not worth the effort unless the company is in a highly competitive industry where small differences in performance may affect the firm's survival potential.
SWOT analysis helps management to develop a realistic understanding of the organization in relation to internal and external environments
TRUE - SWOT analysis should provide a realistic understanding of the organization in relation to its internal and external environments so you can better formulate strategy in pursuit of the firm's mission.
Strategic positioning can be achieved by performing similar activities to rivals, but in different ways
TRUE - Strategic positioning means performing different activities from rivals, or performing similar activities in different ways.
Too little or unreliable historical data may result in erroneous trend analyses
TRUE - The basic assumption of a trend analysis is that the picture of the present can be projected into the future. This is not a bad assumption, if you have enough historical data, but it is always subject to surprises. And if your data are unreliable, they will produce erroneous trend projections.
Luxury carmaker Rolls-Royce has a focused-differentiation strategy
TRUE - The focused-differentiation strategy is to offer products or services that are of unique and superior value compared to those of competitors and to target a narrow market. Some luxury cars, like the Rolls-Royce, Ferrari, and Lamborghini, are so expensive that only a few car buyers can afford them.
The strategic-management process has five steps and a feedback loop
TRUE - The strategic-management process has five steps, plus a feedback loop (see Figure 6.1).
Organizations may turn to the strategic-management process after a crisis
TRUE - When is a good time to begin the strategic-management process? Often it's touched off by some crisis, such as the one Toyota faced regarding claims of uncontrolled acceleration problems in its automobiles.
Strategy formulation is the process of choosing among different strategies and altering them to best fit the organization's needs
TRUE- Strategy formulation is the process of choosing among different strategies and altering them to best fit the organization's needs.
Which of the following strategy tools suggests that an organization will do better in fast-growing markets in which it has a high market share rather than in slow-growing markets in which it has a low market share?
The BCG matrix - In general, the BCG matrix suggests that an organization will do better in fast-growing markets in which it has a high market share rather in slow-growing markets in which it has a low market share. These concepts are illustrated in Figure 6.4.
A fine luggage maker was struggling with heavy debt and a sharp decline in customers, and it eventually declared bankruptcy
The company followed which grand strategy?. Defensive - A defensive strategy or a retrenchment strategy, is a grand strategy that involves reduction in the organization's efforts. In a variation of this strategy, it can declare bankruptcy.
List at least five of the seven essential types of leader behaviors that are needed to fuel the engine of execution
The seven essential types of leader behaviors are: 1. Know your people and your business: engage intensely with your employees. 2. Insist on realism: don't let others avoid reality. 3. Set clear goals and priorities: focus on a few rather than many goals. 4. Follow through: establish accountability and check on results. 5. Reward the doers: show top performers that they matter. 6. Expand people's capabilities: develop the talent. 7. Know yourself: do the hard work of understanding who you are.
Describe the strategic management process. Explain what the "feedback loop" is and why it is important
The strategic management process involves five steps: 1. Establish the mission and vision. 2. Establish the grand strategy. 3. Formulate the strategic plans. 4. Carry out the strategic plans. 5. Maintain strategic control. The feedback loop comes out of strategic control. Through control, managers monitor progress and take corrective action early and rapidly when things go awry, returning to earlier steps to fix problems.
Name the three common grand strategies and provide an example of how a company might use each
There are the three common grand strategies: 1. A growth strategy is a grand strategy that involves expansion—as in sales revenues, market share, number of employees, or number of customers or (for nonprofits) clients served. Examples: It can improve an existing product or service to attract more buyers. It can increase its promotion and marketing efforts to try to expand its market share. It can expand into new products or services. It can acquire similar or complementary businesses. 2. A stability strategy is a grand strategy that involves little or no significant change. Examples: It can go for a no-change strategy (if, for example, it has found that too-fast growth leads to foul-ups with orders and customer complaints). It can go for a little-change strategy (if, for example, the company has been growing at breakneck speed and feels it needs a period of consolidation). 3. A defensive strategy, or a retrenchment strategy, is a grand strategy that involves reduction in the organization's efforts. Examples: It can reduce costs, as by freezing hiring or tightening expenses. It can sell off (liquidate) assets—land, buildings, inventories, and the like. It can gradually phase out product lines or services. It can declare bankruptcy.
Guthrie Community College has done a SWOT analysis and discovered that the number of college-bound high-school juniors in its state has grown by nearly 20% in the past few years
This is a strength for Guthrie. FALSE - The increased number of college-bound high-school juniors represents an opportunity for Guthrie because it is an environmental factor that the organization may exploit for competitive advantage.
Anne runs a small bakery on the main street of a resort town
Though hers was the only bakery around, the business had been suffering during the economic slowdown, and she was contemplating whether she should attempt strategic planning. Anne should be aware of what research finding regarding strategic planning?. Both small and large firms benefit from strategic planning, but the small improvement in performance may not be worth the effort for small firms. - One analysis of several studies found that strategic planning was appropriate not just for large firms. Companies with fewer than 100 employees could benefit as well, although the improvement in financial performance was small. Nevertheless, the researchers concluded, "it may be that the small improvement in performance is not worth the effort involved in strategic planning unless a firm is in a very competitive industry where small differences in performance may affect the firm's survival potential."
Which of the following is not one of the forces that affects industry competition, according to Porter's model for industry analysis?
Threats of government interference. - Strategic-management expert Michael Porter suggested in his Porter's model for industry analysis that business-level strategies originate in five primary competitive forces in the firm's environment: (1) threats of new entrants, (2) bargaining power of suppliers, (3) bargaining power of buyers, (4) threats of substitute products or services, and (5) rivalry among competitors.
Oil companies must be aware of other firms' development of ethanol products since this is an example of which one force in Porter's model for industry analysis?
Threats of substitute products and services. - In an example of the threats of substitute products or services, oil companies might worry that Brazil is close to becoming energy self-sufficient because it is able to meet its growing demand for vehicle fuel by substituting ethanol derived from sugarcane for petroleum.
Apple's iPad has a very high percentage of the market for tablet computers, and this is also a quickly growing market
Thus, using the BCG matrix, the iPad would be classified as a. star - In the BCG matrix, stars have high growth and high market share, and are definite keepers.
Time Warner runs different divisions specializing in television, music, and publishing
Time Warner is using a(n) ______ strategy. diversification - Diversification strategy means operating several businesses in order to spread the risk. Major entertainment/media companies follow this strategy.
Which of the following would be considered a reason for adopting strategic management and strategic planning?
To provide develop a sustainable competitive advantage. - There are three reasons why an organization should adopt strategic management and strategic planning: (1) to provide direction and momentum, (2) to encourage new ideas, and above all (3) to develop a sustainable competitive advantage.
Rafaela is interested in learning more about what one of her competitors is doing so that she can anticipate its upcoming moves and react quickly
Which of the following would you suggest to her for this purpose?. Use investor information. - Gaining competitive intelligence isn't always easy, but there are several avenues and, surprisingly, most of them are public sources including the public prints and advertising, investor information, and informal sources such as trade show gossip and tidbits from salespeople.
Which of the following is a question that should be answered by a company's mission statement?
Who is our customer? - Good mission statements should answer the question, "Who is our customer?" (see Table 6.1).
Creation of alternative hypothetical but equally likely future conditions is called
contingency planning. - Contingency planning, also known as scenario planning and scenario analysis, is the creation of alternative hypothetical but equally likely future conditions.
An organization that keeps costs and prices low in targeting a narrow market is pursuing a strategy of
cost focus. The cost-focus strategy is to keep the costs, and hence prices, of a product or service below those of competitors and to target a narrow market.
Porter's competitive strategies include
cost leadership, differentiation, cost focus, and focused differentiation. - Porter's four competitive strategies (also called four generic strategies) are (1) cost leadership, (2) differentiation, (3) cost-focus, and (4) focused-differentiation.
Timex Group USA makes inexpensive but reliable watches sold throughout the United States and is an example of an organization pursuing a _________ strategy
cost-leadership - The cost-leadership strategy is to keep the costs, and hence prices, of a product or service below those of competitors and to target a wide market.
An organization that is offering unique, superior products or services to a wide market is pursuing a strategy of
differentiation. - The differentiation strategy is to offer products or services that are of unique and superior value compared to those of competitors but to target a wide market.
A recent survey found that the top concern among CEOs worldwide is
excellence in execution - How important is execution to organizational success in today's global economy? A survey of 769 global CEOs from 40 countries revealed that "excellence in execution" was their most important concern, more important than "profit growth," "customer loyalty," "stimulating innovation," and "finding qualified employees."
According to Bossidy and Charan, effective ______ requires managers to build a foundation for it within three core process: people, strategy, and operations
execution - Bossidy and Charan outline how organizations and managers can improve the ability to execute. Effective execution requires managers to build a foundation for execution within three core processes found in any business: people, strategy, and operations.
An organization that offers unique, superior products or services to a narrow market is pursuing a strategy of
focused differentiation. - The focused-differentiation strategy is to offer products or services that are of unique and superior value compared to those of competitors and to target a narrow market.
A vision or projection of the future is called a(n)
forecast. - A forecast is a vision or projection of the future.
The common grand strategies are
growth, stability, and defensive. - Three common grand strategies are growth, stability, and defensive.
Environmental factors that the organization may exploit for a competitive advantage are known as
organizational opportunities. - Organizational opportunities are environmental factors that the organization may exploit for competitive advantage.
The skills and capabilities that give the organization advantages in executing strategies in pursuit of its mission are known as
organizational strengths. - Organizational strengths are the skills and capabilities that give the organization special competencies and competitive advantages in executing strategies in pursuit of its mission.
A grand strategy that involves reduction in the organization's efforts is the ______ strategy
retrenchment - A defensive strategy or a retrenchment strategy, is a grand strategy that involves reduction in the organization's efforts.
"Find out what customers want, then provide it to them as cheaply and quickly as possible" is Walmart's
strategy - A strategy is a large-scale action plan that sets the direction for an organization. An example is "Find out what customers want, then provide it to them as cheaply and quickly as possible," the strategy of Walmart.
A ______ represents an "educated guess" about what must be done in the long term for survival or the prosperity of the organization or its principal parts
strategy - A strategy is a large-scale action plan that sets the direction for an organization. It represents an "educated guess" about what must be done in the long term for the survival or the prosperity of the organization or its principal parts.
A time-series forecast, which is used to predict long-term trends, cyclic patterns, and seasonal variations, is one type of
trend analysis. - An example of trend analysis is a time-series forecast, which predicts future data based on patterns of historical data. Time-series forecasts are used to predict long-term trends, cyclic patterns (as in the up-and-down nature of the business cycle), and seasonal variations (as in Christmas sales versus summer sales).
A small firm is likely to benefit significantly from strategic planning
when it is in a very competitive industry. - Researchers conclude that "it may be that the small improvement in performance is not worth the effort involved in strategic planning unless a firm is in a very competitive industry where small differences in performance may affect the firm's survival potential."
