Midterm Exam Review (McGraw Hill)

SBU (strategic business unit)

A standalone division of a larger conglomerate, with its own profit-and-loss responsibilities, is call a(n) ________.

executives

According to Level-5 pyramid, which level of leadership has the fewest members?

Offers helpful and effective input.

According to the pyramid of five levels of strategic leadership, a Level-1 leader typically shows which capability?

find meaning in their work

An inspiring vision helps employees ________.

- Strategy can be planned. - Strategy can emerge from the bottom up.

Critics of the more formalized strategic planning approaches proposed a framework that accounts for which of the following realities?

difference between

Economic value created is the _______ the cost to produce a product/service and the amount the buyer is willing to pay for it.

They allow CEOs to effectively communicate their ideas and positions.

For CEOs, what is an advantage of face-to-face meetings?

business

In the strategy process, questions concerning HOW to compete, such as through differentiation, are referred to as ______ strategy.

- the total return to shareholders - benchmarks

In their annual filling with the Securities and Exchange Commission, public companies in the United States must report which of the following?

total return to shareholders

Investors in a company are mostly concerned about the company's _______.

1. analysis 2. formulation 3. implementation

Place the progression of steps in the traditional top-down strategic planning in order, with the first step at the top.

comparative analysis of firms

Public companies are required by law to release detailed accounting data, which enables _________.

- there is uncertainty about the future - plans for the future can be wrong

Shortcomings of top-down strategic planning are that _________.

much more important

Since about the year 2000, assets not captured in firms' accounting data have become _______ to a firm's competitive advantage.

- Costly - Difficult to reverse

Strategic commitments tend to be which of the following?

$1,000,000

The Luminarium Corporation has a market capitalization of $100,000,000, and each share is worth $100. How many outstanding shares of Luminarium Corporation are there?

2008 global financial crisis

The _______ is an example of a black swan event.

administrative

The acronym SG&A stands for sales, general, and ________ expenses.

capital

The financial metric ROIC stand for Return on Invested _______.

False

True or false: A Level-3 leader ought to be able to create long-lasting greatness through resolve and humbleness.

True

True or false: The resource-allocation process (RAP) can be designed to support planned emergence.

product-oriented

What type of vision statement tends to limit a manager's flexibility and ability to adapt?

outperform

When a firm does favorably compared to similar firms, it is said to ______.

cannot recover their risk capital

When a firm goes bankrupt, shareholders ________.

accounting profitability

When competitive advantage is assessed from an analysis of publicly available data, a firm measures its _______.

- COGS/revenue - SG&A expense/revenue - R&D expense/revenue

When one wants to further explore the difference in return on revenue (ROR) for two competitors, one can look at which of the following ratios?

intangibles

When the high market valuation of internet-based firms, such as Facebook or Google, is analyzed, the importance of ______ becomes clear.

groupthink

Which cognitive bias involves individuals agreeing with a leader without critically evaluating or challenging the leader's views and assumptions?

- The vision statements are customer-oriented. - Organizational structures align with the vision statements. - Internal stakeholders are invested in defining the vision.

Which conditions are most likely to foster a positive relationship between vision statements and firm performance?

- return on assets -return on revenue - return on equity

Which of the following are among the most commonly used metrics for comparing the performance of different companies?

- Overall macroeconomic factors have a direct bearing on stock prices. - Stock prices are influenced by the psychological mood of investors. - Stock prices can be highly volatile.

Which of the following are considered disadvantages of the shareholder value creation approach?

- pension obligations - operating leases

Which of the following are considered off-balance sheet items?

- the 9/11 terrorist attacks - the Fukushima nuclear disaster - the accounting scandal at Enron

Which of the following are examples of black swan events?

- Its importance has declined over time. - It is calculated as costs of assets minus accumulated depreciation. - It captures the historical cost of a firm's assets.

Which of the following are true of a firm's book value?

Individuals use simple examples to explain complex problems, even though the ideas in question may be very different from each other.

Which statement best describes the cognitive bias known as reason by analogy?

Individuals reach conclusions based on a small sample size or otherwise limited data, thereby violating the law of large numbers.

Which statement best describes the cognitive bias of representativeness?

- Viewed over the long term, stock market valuation is a useful metric for assessing competitive advantage. - Stock market valuation is equal to the number of outstanding shares multiplied by the share price.

Which statements about stock market valuations are true?

value

In general, a firm generates _________ when its cost of capital is lower than its ROIC.

own at least one share of the company's stock

In order to be considered a legal owner of a public company, a person or organization must _______.

- share price - number of outstanding shares

In order to determine market capitalization, one multiplies which of the following together?

Managers work to identify potential future scenarios.

In the scenario-planning approach, what happens during the analysis stage of the AFI framework?

standalone division of a larger conglomerate

A strategic business unit (SBU) is defined as a(n) ________.

inspirational vision

A(n) ________ can help employees feel that they are doing something worthwhile and are part of something important and meaningful.

Level 2

According to the Level-5 leadership pyramid, a person is referred to as a contributing team member at which level?

It has a major impact on society.

A black swan event has which of the following characteristics?

that steps are taken to achieve the mission

A powerful strategic commitment assures _______.

- a firm's past - expectations of the firm's future performance - a firm's current state

According to the efficient-market hypothesis, information about which of the following is embedded in a stock price?

benchmarks

Companies are required to provide ________ to shareholders, which are used in determining a firm's competitive advantage.

risk capital

From the view of a shareholder, the measure of competitive advantage that matters most is return on _______.

correlated

The firm's accounting profitability, ability to create shareholder value, and ability to generate economic value tend to be _________.

flexible

The goal of using the AFI strategy framework for scenario planning is to create strategic plans that are _________.

serendipity

The owner of small hotel resort would like to advertise in major American newspapers and magazines as a part of a larger strategy, but lacks the money to do so. One day, the hotelier meets the owner of a group of newspapers and magazines, who offers advertising space in exchange for a stay at the hotel. This is an example of which of the following?

COGS/revenue ratio

To determine how efficiently a company can produce a good, managers look to the _______.

SG&A/revenue

To determine how well money devoted to sales support is being spent, managers look at the marketing intensity ratio, which is also known as ________.

net profits/invested capital

To understand how effectively a firm uses its capital, one can use the ratio _______.

False

True or false: Top-down strategic planning is most effective when the environment is constantly changing.

reason by analogy

What cognitive bias involves using simple examples to make sense out of complex problems, even though the things being compared may be very different on a deeper level?

representativeness

What cognitive bias is in play when individuals draw conclusions based on very small samples or a single anecdote, thus violating the law of large numbers?

They create enduring greatness.

What distinguishes a Level-5 leader from other levels of leaders?

Investors will expect a similarly high level of growth in the future.

What is one potentially negative outcome that firms face when they deliver higher than expected growth?

Strategy can be planned or emerge from the bottom-up.

What is the premise of Henry Mintzberg's position regarding strategic planning?

strategy implementation

What is the primary concern of functional strategy?

Does things right.

Which of the following is a capability a Level-3 leader typically exhibits?

The manager is capable of working effectively with others to accomplish common objectives.

Which of the following is a capability that a Level-2 manager typically exhibits?

black swan event

Which of the following is a term used to describe a highly unlikely event that has a significant impact on society?

Contributes through collaboration.

Which of the following is not necessarily a capability a Level-1 leader typically exhibits?

measurement

Which of the following is not one of the steps in the traditional top-down strategic planning process?

They can be individuals or organizations.

Which of the following is true about shareholders of a public company?

How do we put our business strategy into action?

Which of the following questions is involved in functional strategy implementation?

- Accounting data focus primarily on tangible assets. - Accounting data are historical and therefore backward-looking.

Which of the following statements about the disadvantages of the accounting profitability perspective are correct?

- Apple introduced a series of popular consumer electronic devices. - Microsoft leveraged its computer operating system to sell other software programs.

Which of the following statements are true about rival businesses Apple and Microsoft?

A firm's competitive advantage is transitory.

Which of the following statements is best illustrated by the decades-long business rivalry between the technology giants Apple and Microsoft?

The price determines in part the stock's market valuation.

Which of the following statements is true about a firm's stock price?

Individuals automatically agree with a leader without critically evaluating or challenging the leader's views and assumptions.

Which statement best describes groupthink?

- A positive relationship between vision statements and firm performance is more likely to exist when the visions are customer-oriented. - Vision statements and firm performance are sometimes associated with one another.

Which statements about vision statements and firm performance are true?

business

Which strategy addresses the question of how to compete?

Product-oriented companies have less flexibility to meet consumer needs.

Why are businesses with product-oriented vision statements often less effective than businesses with customer-oriented vision statements?

A face-to-face meeting

_____ is a form of communication that enables the CEO of a company to pick up on nonverbal information, such as moods and body language.

Serendipity

________ describe(s) random events, pleasant surprises, and accidental happenstances that can have a profound impact on a firm's strategic initiatives.

Planned emergence

__________ allows for bottom-up strategic initiatives to occur within a company and to be reviewed by executives.