Strategic Management
Creative intelligence involves the ability to see patterns in data, integrating data, and making insights. Which of the following are the four patterns of action managers should take in order to develop more creative and higher potential innovations?
Questioning, observing, experimenting, and networking.
On average, approximately what percentage of corporate ventures reaches profitability within six years?
50%
Which of the following reasons explains why painter Vincent van Gogh died penniless, while painter Pablo Picasso left a $740 million estate upon this death?
Van Gogh was not as social as Picasso, Van Gogh's brother was his connection to the art world and not a very successful connection.
Corporate-level strategy focuses on _____________.
a firm's group(s) or business('s) & how to compete in and how to go about gaining competitive advantages.
Strategic business unit (SBU) structures are best suited for corporations pursuing ____, whereas holding company structures are best suited for companies with ______ strategies.
related diversification, unrelated diversification.
The least effective way to retain human capital is to _________.
require employees to sign contracts that prevent them from leaving
The creation of knowledge assets is typically characterized by ____________.
high upfront costs and low variable costs.
Functional structures are usually found in organizations where ____________ .
high volume production
Research has consistently shown that firms that achieve both cost leadership and differentiation advantages tend to perform ______________.
higher than firms that achieve either a cost or a differentiation advantage
Tools and techniques used to achieve effective coordination and integration of key activities in an organization include all of the following except _________.
horizontal diversification
Product differentiation by incumbents act as an entry barrier because __________.
it causes entrants to spend heavily to overcome existing customer loyalties
The downsides or limitations of mergers and acquisitions include all of the following EXCEPT:
it is a slow means to enter new markets and acquire skills and competences.
The size of pricing and differentiation advantages between competitors decreases in which stage of the market life cycle?
maturity
According to Michael Porter, there is a tremendous allure to _________. It is the big play, the dramatic gesture. With one stroke of the pen you can add billions to size, get a front-page story, and create excitement in markets.
mergers and acquisitions
Internal development may be time consuming and, therefore, firms may forfeit the benefits of speed that growth through __________ and __________ can provide.
mergers; acquisitions
What type of organization is defined as a central hub surrounded by networks of outside suppliers and specialists?
modular
One of the main reasons the Internet is eroding sustainable competitive advantages is that _______.
nearly all competitors will have greater access to tools for managing costs making it hard for anyone to achieve an advantage.
Financial reasons for undertaking internal corporate venturing include ________.
obtaining above average returns.
What is the name of the practice that many modular organization use to grow?
outsourcing
In the general environment, many relationships exist among the various elements. General environmental trends can have positive and negative impacts on various industries. For example, the aging population might have a ______ impact on the health care industry and a ______ impact on the baby product industry. These are called _____________ impacts.
positive, negative, demographic
Whereas _______ are willing to violate procedures and operate outside normal channels, _______ gather hard data and develop a strong case for why a project should be killed.
product champions, exit champions
Organizations generally tend to become internally focused when faced with _________ and ________.
Resource scarcity, declining performance, external pressures (all of these)
Which of the following statements about simple organizational structures is not true?
Simple Structure: small, focus strategy, specialists cannot develop deep expertise, may lead to problems such as unclear boundaries of authority and few career advancement options.
An organization such as ConAgra that has dozens of different divisions with similar products will probably have the greatest success with which form of organization structure?
Strategic business unit structure.
Differentiation provides protection against rivalry since brand loyalty lowers customer sensitivity to price and raises customer switching costs.
TRUE
Potential pitfalls of a differentiation strategy include the idea that perceptions of differentiation may vary between buyers and sellers. The issue here is that beauty is in the eye of the beholder. Companies must realize that although they may perceive their products and services as differentiated, their customers may view them as commodities.
TRUE
Which of the following is not a disadvantage of a divisional type of organizational structure?
There is a separation of strategic and operating control.
Which of the following statements about skunkworks is false?
They refer to a specialized type of outside contractor that corporations use to develop entrepreneurial ideas.
Which of the following statements about strategic groups is FALSE?
strategic groupings are of little help to a firm in assessing mobility barriers that protect a group from attacks by other groups
The relationship between strategy and structure can be best described as _______
strategy and structure influence each other.
Generally speaking, discussions of the relationship between strategy and structure strongly imply that
structure follows strategy.
Which of the following is FALSE regarding how a differentiation strategy can help a firm to improve its competitive position relative to the Porter five forces model?
supplier power is increased because supplier will be able to charge higher prices for their inputs
Which of the following is not a potential pitfall of an integrated overall low cost and differentiation strategy?
targeting too large a market that causes unit costs to increase.
The failure of many auditing firms to raise red flags about accounting irregularities in companies such as Enron and WorldCom is generally attributed to all of the following factors except
the failure of U.S. audit firms to follow internationally accepted accounting standards.
A firm should consider vertical integration when ___________.
the firm's suppliers of raw materials are often unable to maintain quality standards.
People who identify with and are more committed to the core mission and values of the organization are less likely to stray or bolt to the competition. Paying people more is seldom the most important factor in attracting and retaining human capital.
the key role of social capital in leveraging human capital within and across the firm
Generally, employees are most likely to stay with an organization if _____________.
the organization's mission statement and values align with the employee's mission and value
One of the most famous examples of a ______ is that of Disneyland (To be the happiest place on earth). Another example is that of Medtronic (Restoring patients to full life).
vision
Examples of __________ include: To be the happiest place on earth (Disneyland), and restoring patients to full life (Medtronic).
vision statements
If an international firm has a multidomestic strategy and a relatively high level of product diversity, the best choice for its organizational structure is _________ structure.
worldwide matrix
If an international firm has a global strategy and a relatively low level of product diversity, the best choice for its organizational structure is __________ structure.
worldwide product division
In managing the corporate portfolio, the BCG matrix would suggest that __________.
"question marks" can represent future "stars" if their market share is increased.
What advantages does outsourcing not provide an organization?
Advantages: accessing best in class goods and services, enabling rapid expansion with relatively low capital investment, focusing scare resources on core competencies.
Which of the following is NOT a disadvantage of the barrier-free form of organization?
Additional integration issues result in a slower response to market changes.
Which of the following statements regarding internal development as a means of diversification is FALSE?
An advantage of internal development is that it is generally faster than other means of diversification and firms can benefit from speed in developing new products and services.
Which of the following is an advantage of a divisional type of organizational structure?
An enhanced ability to respond quickly to changes in the external environment
According to author, Jeffrey Pfeffer, which of the following is not an advantage of teams?
Because teams interact so closely, coordination and integration becomes unnecessary.
According to the text, which of the following is not one of the methods companies can use to enhance their competitive position via innovativeness?
Copying the business practices or techniques of successful competitors.
Which of the following is a disadvantage of a functional type of organizational structure?
Differences in functional orientation may impede communication and coordination.
Which of the following is not a disadvantage of virtual structures?
Difficulty in individual and organizational knowledge sharing.
Management innovations such as total quality, benchmarking, and business process reengineering cannot lead to sustainable competitive advantage because:
Every company is trying to implement them and hence it does not make a company different from others
A narrow market focus is to a differentiation-based strategy as a broadly-defined target market is to a cost leadership strategy.
FALSE
The antitakeover tactic, _______, is when a firm offers to buy shares of their stock from a company (or individual) planning to acquire their firm at a higher price than the unfriendly company paid for it.
Greenmail
Which statement regarding competitive advantages is true?
If several competitors pursue similar differentiation tactics, they may all be perceived as equals in the mind of the consumer.
Which of the following is considered to be an advantage of a matrix structure?
Increased responsiveness to the market.
One of the following is not a question that should be answered when evaluating the performance of corporate venturing efforts. Which is it?
Is the venture attracting external venture funding?
One of the following statements about innovativeness is not true. Which is it?
It refers to making decisions and taking risks without certain knowledge of probable outcomes.
Which of the following is NOT a strategic risk of outsourcing?
Loss of non-vital functions
Amazon was able to define the online bookselling market by entering the market early and defining the user experience. This is an example of _____________.
Market penetration?
A firm should consider vertical integration if the company is not satisfied with the quality of the value that its present suppliers and distributors are providing.
N/A
Among the most striking differentiation trends are new ways to interact with consumers. In particular, the Internet has created new ways of differentiating by enabling mass customization, which improves the response to customer wishes.
N/A
Attracting, developing, and retaining human capital are highly interrelated activities, like a three-legged stool. If one leg is weak or broken, the stool collapses. To illustrate such interdependence, poor hiring impedes the effectiveness of development and retention processes. In a similar vein, ineffective retention efforts place additional burdens on hiring and development.
N/A
Core competencies reflect the collective learning in organizations, which is how to coordinate diverse production skills, integrate multiple streams of technologies, and market diverse products and services. In some circumstances, a core competence can create value and provide a viable basis for synergy among the businesses in a corporation. Casio, a giant electronic products producer, synthesizes its abilities in miniaturization, microprocessor design, material science, and ultrathin precision castings to produce digital watches. These are the same skills it applies to the design and production of its miniature card calculators, digital cameras, pocket electronic dictionaries, and other small electronics.
N/A
Corporate-level strategy addresses two related issues: what businesses should a corporation compete in and how can these businesses be managed so they create synergy. Portfolio management matrices can be used to improve understanding of the competitive position of a portfolio (or family) of businesses, to suggest strategic alternatives, and to identify priorities for the allocation of resources.
N/A
Corporate-level strategy focuses on gaining long-term revenue, profits, and market value through managing operations in multiple businesses.
N/A
Diversification initiatives, whether through mergers and acquisitions, strategic alliances and joint ventures, or internal development, must be justified by the creation of value for shareholders.
N/A
Each of the four quadrants of the BCG Portfolio grid has different implications for the SBUs that fall into that category. Question Marks are SBUs competing in high-growth industries but having relatively weak market shares. Resources should be invested in them to enhance their competitive positions, potentially making them Stars.
N/A
Explicit (or codified) knowledge, on the other hand, is knowledge that can be documented, widely distributed, and easily replicated. Here, Mary was able to use knowledge assets created by previous employees to complete the work.
N/A
For most of the 20th century, managers focused on tangible resources such as land, equipment, and money and intangibles like brands, image, and customer loyalty. Today, more than 50 percent of the GDP in developed economies is knowledge-based; it is based on intellectual assets and intangible people skills.
N/A
For retention of talent, greater efforts should be directed at a good work environment and incentives, although employment contracts and noncompete clauses may sometimes have their place.
N/A
GE Medical Systems offers a monetary reward for referrals, but it is peanuts compared to the fees that it typically pays to headhunters for each person hired. When someone refers a former colleague or friend for a job, his or her credibility is on the line. Thus, employees will be careful in recommending people for employment, unless they are reasonably confident that these people are good candidates.
N/A
In an industry analysis, two assumptions are unassailable: (1) no two firms are totally different, and (2) no two firms are exactly the same. What value is the strategic group concept as an analytical tool? First, strategic groupings help a firm identify barriers to mobility that protect a group from attacks by other groups. They also help chart the future directions of firm strategies and are helpful in thinking through the implications of each industry trend for the strategic group as a whole.
N/A
In firms where knowledge and the management of knowledge workers are relatively important contributors to developing products and services, and physical resources are less critical, the ratio of market-to-book value tends to be much higher.
N/A
In most industries, the threat of new entrants has increased because digital and Internet-based technologies lower barriers to entry. Internet businesses may enjoy savings on traditional expenses which may encourage more entrants who see an opportunity to capture market share by offering a product or performing a service more efficiently than existing competitors.
N/A
In the current environment, collaboration and interdependence are vital to organizational success. Individuals must share their knowledge and work constructively to achieve collective, not just individual, goals. Traditional systems evaluate performance from a single perspective (i.e., top down) and generally do not address the softer dimensions of communications and social skills, values, beliefs, and attitudes.
N/A
In the knowledge economy, the development of social capital (the friendships and working relationships among talented individuals) gains importance, because it helps tie knowledge workers to a given firm. The interaction, sharing, and collaboration will create a situation in which a worker will develop firm-specific ties and be less likely to bolt for a higher salary offer.
N/A
In the maturity stage of the industry life cycle, advantages based on efficient manufacturing operations and process engineering become more important for keeping costs low as customers become more price sensitive.
N/A
In the maturity stage of the industry life cycle, rivalry among existing rivals intensifies because of fierce price competition at the same time that expenses associated with attracting new buyers are rising. It also becomes more difficult for firms to differentiate their offerings, because users have a greater understanding of products and services.
N/A
Industry life cycles are important because the emphasis on various generic strategies, functional areas, value-creating activities, and overall objectives varies over the course of an industry life cycle.
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Many experts agree that the net effect of the digital economy is fewer rather than more opportunities for sustainable advantages. This means strategic thinking becomes more important. More specifically, the Internet has provided all companies with greater tools for managing costs.
N/A
Nothing is forever, when it comes to competitive advantages. Rapid changes in technology, globalization, and actions by rivals from within and outside of the industry can quickly erode company advantages. It is becoming increasingly important to recognize that the duration of competitive advantages is declining, especially in technology intensive industries.
N/A
One of the challenges of knowledge-intensive organizations is to capture and codify the knowledge and experience that resides in the heads of its employees. Once a knowledge asset (e.g., a software code or processes) is developed and paid for, it can be reused many times at very low cost, assuming that it doesn't have to be substantially modified each time.
N/A
Potential disadvantages to internal development include that it may be time consuming and that firms may forfeit the benefits of speed that growth through mergers can provide. This may be important to high-tech or knowledge-based organizations in fast-paced environments in which being an early mover is critical.
N/A
Research supports the notion that firms that identify with one or more of the forms of competitive advantage outperform those that do not. There has been a rich history of strategic management research addressing this topic. One study found that businesses combining multiple forms of competitive advantage (differentiation and overall cost leadership) outperformed businesses that used only a single form.
N/A
Several factors contribute to stronger supplier power. First, Web-based business may create more downstream outlets for suppliers to sell to. Second, Web-based purchasing arrangements make purchasing easier and discourage customers from switching. Online procurement systems directly link suppliers and customers, reducing transaction costs and paperwork. Third, the use of proprietary software that links buyers to a supplier website may create a rapid, low-cost ordering capability that discourages the buyer from seeking other sources of supply. Finally, suppliers will have greater power to the extent that they can reach end users directly without intermediaries.
N/A
Stars are SBUs competing in high-growth industries with relatively high market shares. These firms have long-term growth potential and should continue to receive substantial investment funding. When growth slows, they may become Cash Cows themselves.
N/A
Supplier power is also decreased, because there is a certain amount of prestige associated with being the supplier to a producer of highly differentiated products and services.
N/A
The rise to prominence of knowledge workers as a vital source of competitive advantage is changing the balance of power in organizations today. Knowledge workers place professional development and personal enrichment (financial and otherwise) above company loyalty.
N/A
The risks of vertical integration include costs and expenses associated with increased overhead and capital expenditures, loss of flexibility resulting from large investments, problems associated with unbalanced capacities along the value chain, and additional administrative costs associated with managing a more complex set of activities.
N/A
There are potential disadvantages to internal development. It may be time consuming; firms may forfeit the benefits of speed that growth through mergers can provide. This may be important among high-tech or a knowledge-based organization in fast-paced environments, where being an early mover is critical.
N/A
There are several downsides to social capital. Some firms have been adversely affected by very high levels of social capital because it may breed groupthink, a tendency not to question shared beliefs. Additionally, the socialization processes (orientation, training, etc.) can be expensive in terms of both financial resources and managerial commitment.
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There are several limitations of mergers and acquisitions including that takeover premiums paid for acquisitions are typically very high, competing firms often can imitate any advantages or copy synergies that result from the merger or acquisition, manager egos sometimes get in the way of sound business decisions, and cultural issues may doom the intended benefits from M and A endeavors.
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There are some notable downsides to portfolio models. They compare SBUs on only two dimensions, making the erroneous assumption that those are the only factors that really matter and that every unit can be accurately compared on that basis. The approach views each SBU as a stand-alone entity, ignoring the promise for synergies across business units. The process can become mechanical, substituting an oversimplified graphical model for the important contributions of management judgment. Reliance on strict rules regarding resource allocation across SBUs can be detrimental to long-term viability for the firm. While easy to comprehend, the imagery of the BCG matrix can lead to some troublesome, overly simplistic prescriptions.
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When existing competitors have strong brand identification and customer loyalty, differentiation creates a barrier to entry by forcing entrants to spend heavily to overcome existing customer loyalties.
N/A
With experience, unit costs of production decline as output increases in most industries. The experience curve, developed by the Boston Consulting Group in 1968, is a way of looking at efficiency gains that come with experience. For a range of products, as cumulative experience doubles, costs and labor hours needed to produce a unit of product decline by 10 to 30 percent.
N/A
With focus strategies, the Internet offers new avenues in which to compete because they can access markets less expensively (low cost) and provide more services and features (differentiation). Some claim that the Internet has opened up a new world of opportunities for niche players who seek to access small markets in a highly specialized fashion.
N/A
The innovation dilemma known as seeds versus weeds refers to ______.
None of the above.
Which of the following is an advantage of a functional type of organizational structure?
Pooling of specialists enhances coordination and control.
Which of the following is not an advantage of a strategic business unit (SBU) type of organizational structure?
The corporate office is more removed from the individual divisions.
Due to the Internet, firms that use a focus strategy have new opportunities to _________.
access niche markets in a highly specialized fashion.
After 15 teams created 128 different phones, Chris Galvin, former CEO of Motorola, recently eliminated the autonomous teams being used to develop new wireless phones. This was necessary because such teams _______.
all of the above
According to Henry Mintzberg, the realized strategies of a firm:
are combinations of deliberate and emergent strategies.
Three approaches to combining overall low cost and differentiation include:
automated and flexible manufacturing systems, exploiting the profit pool concept for competitive advantage, and coordinating the extended value chain by way of information technology.
Managing a knowledge intensive workforce is very challenging. The best way for a firm to manage its workforce is to __________.
balance efforts in the attraction, selection, and retention of top talent.
In the knowledge economy, if a large portion of company value is in intellectual and human assets, the difference between the market value and book value of the company should ___________ a company with mostly physical and financial assets.
be larger than
A narrow market focus is to a differentiation-based strategy as a __________________.
broadly defined market strategy is to a cost leadership strategy
According to the text, _________, which support fledgling startups are often used to pursue specific entrepreneurial ventures developed by _______.
business incubators, new venture groups.
Two common forms of a focused approach to corporate entrepreneurship include _____ and ________.
business incubators, new venture groups.
As markets mature, ___________.
competition on the basis of differentiation is preferable to price competition.
In corporations with a strong entrepreneurial culture, the willingness and ability to change is _________.
considered a core capability
Portfolio management matrices are applied to what level of strategy?
corporate level
The reasons analyst recommendations are often more optimistic than warranted by an objective analysis of the facts include all of the following except that
culture sets explicit boundaries
The most likely time to pursue a harvest strategy is in a situation of _______.
decline in the market lifecycle
Today, the loyalty of a knowledge worker to his or her employing firm has __________ compared to his or her loyalty to his or her profession and colleagues.
decreased
In the 1990s, DuPont used its knowledge of plastics to develop biodegradable plastic products. This is an example of ______.
defining its innovation efforts within the context of its "strategic envelope."
The text discusses three approaches to combining overall cost leadership and differentiation competitive advantages. Which of the following is not one of these three approaches?
deriving benefits and highly focused and high technology markets.
The innovation dilemma known as building capabilities versus collaborating refers to _______.
developing innovation skills internally versus partnering with qualified outsiders.
Strategic business unit (SBU) and holding company structures result from extensive _____.
diversification
Diversification initiatives include all of the following except ___________________.
diversification initiatives include: mergers and acquisitions, strategic alliances and joint ventures, or internal development
A strategy of related diversification requires most firms to organize around geographical areas or product lines. This type of organizational growth leads to ______ structure.
divisional
Members of boards of directors are:
elected by the shareholders as their representatives.
Human capital and social capital are vital for superior firm performance. If a firm has strong human capital, the firm may exploit this by building social capital. This can be accomplished by _____.
encouraging the sharing of ideas between employees in the firm
According to the text, firms that want to enhance their entrepreneurial position by being competitively aggressive should _______.
enter markets with drastically lower prices.
Piecemeal productivity improvements during a turnaround typically do NOT involve _______.
expansion of a firm's product market scope.
The pitfalls of integrated overall cost leadership and differentiation include:
firms that fail to attain both strategies may end up with neither and become stuck-in-the-middle; underestimating the challenges and expenses associated with coordinating value-creating activities in the extended value chain; and miscalculating sources of revenue and profit pools in the company industry.
A matrix organizational structure is characterized by a combination of the ________.
functional and divisional organizational structure.
Virtual organizations ______ whereas modular organizations retain _____.
give up part of their strategic control, retain full strategic control.
Social capital has downsides. Which of the following is a downside?
groupthink
Casio, a giant electronic products producer, synthesizes it abilities in miniaturization, microprocessor design, material science, and ultrathin precision castings to produce digital watches. It uses the same skills to produce card calculators, digital cameras, and other small electronics. These collective skills are known as _________________.
horizontal relationships
Maintaining a competitive workforce is very challenging in the current economy. The role of evaluating human capital, in recent years, has _____.
increased
Because the Internet lowers barriers to entry in most industries, it ________.
increases the threat of new entrants.
As the competitive environment changes, strategic management must focus on different aspects of the organization. Recently, strategic management has moved from focusing on tangible resources to ____.
intangible resources
Gathering competitive intelligence ___________.
is good business practice
Many companies use referrals by current employees as a source for new hiring and even monetarily reward them because __________________.
it is less expensive than the fees paid to headhunters and current employees are normally very careful in recommending someone because their credibility is on the line.
All of the following are limitations (or downsides) of the BCG (Boston Consulting Group) matrix EXCEPT:
it takes a dynamic view of competition which can lead to overly complex analyses.
The risks of vertical integration include all of the following EXCEPT:
lack of control over valuable assets
A differentiation strategy enables a business to address the five competitive forces by ______.
lessening competitive rivalry by distinguishing itself.
Four basic strategies are available in the decline phase:
maintaining, harvesting, exiting, or consolidating.
According to the study by OReilly and Tushman, effective ambidextrous structures had all of the following attributes except ________.
managerial efforts were highly focused on revenue enhancement
Which of the following methods of implementing a differentiation strategy has been greatly enhanced because of Internet technologies?
mass customization
Important advantages of a holding company structure include
savings in personnel and overhead expenses associated with a small corporate office.
Common features of a dispersed approach to corporate entrepreneurship include all of the following except _______________.
semi-autonomous new venture groups
Real options analysis is most appropriate when a
small investment upfront can be followed by a series of subsequent investments.
Supplier power has increased because of the Internet for all of the following reasons EXCEPT:
some suppliers have created Web-based purchasing systems that encourage switching.
Effective ambidextrous organizations have alignment, which means that ________ .
there is a clear sense of how value is being created in the short-term and how activities are properly integrated and coordinated.
Successful organizations are effective in motivating people. Employees work best when:
they are striving towards specific goals
In the BCG Growth Share Matrix, the suggested strategy for Stars is to ________.
use allocated funds from "cash cows" to grow the stars into cash cows
Mary Stinson was required to take over a project after the entire team left the company. She was able to reconstruct what the team had accomplished through reading e-mails exchanged by the members of the team. This is an example of ___________.
using explicit knowledge.
Shaw Industries, a giant carpet manufacturer, increases its control over raw materials by producing much of its own polypropylene fiber, a key input into its manufacturing process. This is an example of ______________.
vertical integration
Unbalanced capacities that limit cost savings, difficulties in combining specializations, and reduced flexibility are disadvantages associated with ___________.
vertical integration