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) |
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) |
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) |
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) |
A strategy is a large-scale action plan that sets direction for an organization |
True |
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) |
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) |
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) |
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) |
A sustainable competitive advantage is the ability of an organization to produce goods or services more effectively than its competitors and outperform them |
True |
Ford’s Sync in-dash communications platform, despite its high level of technology, has been unable to provide the company with a distinct competitive advantag |
False |
Harvard Business School professor Michael Porter is a leading authority on competitive strategy |
True |
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) |
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) |
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) |
Good strategy allows a company to be everything to everyone |
False |
Strategic planning is appropriate for large companies, but does not help the performance of small companies |
False |
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 |
Organizations may turn to the strategic-management process after a crisis |
True |
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) |
The strategic-management process has five steps and a feedback loop |
True |
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) |
Many good mission statements include descriptions of an organization’s customers, as well as its major products or services |
True |
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) |
A mission statement should be ambitious |
False (A good vision statement is ambitious) |
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 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) |
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 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) |
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 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) |
Strategy formulation is the process of choosing among different strategies and altering them to best fit the organization’s needs |
True |
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) |
Strategy actualization is the term for putting strategic plans into effect |
False (Putting strategic plans into effect is called strategic implementation) |
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) |
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) |
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) |
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) |
Obsolete technology and outdated facilities are examples of organizational threats |
False (Organizational weaknesses) |
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) |
Organizational threats are the environmental factors that hinder an organization’s ability to achieve a competitive advantage. |
True |
Forecasting is a strategic-planning tool used to make long-term strategy |
True |
Two types of forecasting are trend analysis and competitive intelligence |
False (Two types of forecasting are trend analysis and contingency planning) |
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) |
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) |
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) |
The use of hedging to manage the cost of aviation fuel is an example of trend analysis. |
False |
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) |
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 |
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) |
Luxury carmaker Rolls-Royce has a focused-differentiation strategy |
True |
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) |
A small florist most likely follows a diversification strategy |
False |
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) |
Burberry makes outerwear, accessories like umbrellas, and children’s clothing, which is called a related diversification strategy |
True |
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 both their business growth rates and their share of the market) |
Cash cows in the BCG matrix have slow growth but high market share |
True |
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 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) |
Insisting on realism is among the leader behaviors that help a manager successfully execute a strategy |
True |
Managers who execute well insist on constant optimism |
False |
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. |
forecast (D) |
"Find out what customers want, then provide it to them as cheaply and quickly as possible" is Walmart’s |
strategy (C) |
Effective strategic management involves |
managers from all parts of the organization (E) |
Which of the following would be considered a reason for adopting strategic management and strategic planning? |
To provide develop a sustainable competitive advantage (D) (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) |
Which of the following statements about strategic planning and strategic management is true? |
Both should be implemented because they can provide direction and momentum (C) |
Which of the following is not a typical cause of bad planning? |
Inadequate planning budgets (B) |
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? |
Talented employees (A) |
__________ means performing different activities from rivals or performing similar ones in different ways. |
Strategic positioning (E) |
Which of the following statements about strategy and strategic positioning is false? |
Few customers with narrow needs can be a source of strategic position (E) (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) |
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 (C) |
A small firm is likely to benefit significantly from strategic planning |
when it is in a very competitive industry (B) |
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 (E) |
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 (A) |
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 (C) (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.) |
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) |
Which of the following is not a stage in the strategic-management process? |
Conduct a trend analysis (A) |
Which of the following should be included in a good vision statement? |
Firm’s standards of excellence and high ideals (D) |
Which of the following is a question that should be answered by a company’s mission statement? |
Who is our customer? (E) |
The common grand strategies are |
growth, stability and defensive (C) |
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 (B) |
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 (C) |
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) |
A grand strategy that involves reduction in the organization’s efforts is the ______ strategy. |
rentrenchment (A) |
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 (D) |
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 (D) |
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 (C) |
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 (C) |
The process of choosing among different strategies and altering them to best fit the organization is called |
Strategy formulation (A) |
Actively selling strategic plans to middle and supervisory managers, rather than just announcing them, is helpful for |
strategy implementation (C) |
______ consists of monitoring the execution of strategy and making adjustments, if necessary. |
Strategic control (B) |
Which of the following is not one of Bryan Barry’s recommendations to keep a strategic plan on track? |
Avoid compromise (D) |
Gaining information about one’s competitors’ activities so that you can anticipate their moves and react appropriately is called |
competitive intelligence (E) |
Which of the following is not a likely source of information for competitive intelligence? |
Competitors customer records (D) |
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 (C) |
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 (E) |
A situational analysis is also known as |
SWOT analysis (B) |
When analyzing the "S" in a SWOT analysis, a manager might take note of |
strong financial resources of the firm (D) |
When analyzing the "W" in SWOT analysis, a manager might take note of |
high turnover of employees (C) |
When analyzing the "O" in SWOT analysis, a manager might take note of |
favorable government regulations (A) |
When analyzing the "T" in SWOT analysis, a manager might take note of |
a competitors new product (B) |
Analysis of changing demographics of the U.S. population would be part of the assessment of a company’s |
opportunities or threats depending… (E) |
A manager assessing the organization’s access to capital is involved in analysis of |
strengths or weaknesses depending… (E) |
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 (B) |
The skills and capabilities that give the organization advantages in executing strategies in pursuit of its mission are known as |
organizational strengths (A) |
Environmental factors that the organization may exploit for a competitive advantage are known as |
organizational opportunities (B) |
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 (D) |
A vision or projection of the future is called a(n) |
forecast (B) |
A time-series forecast, which is used to predict long-term trends, cyclic patterns, and seasonal variations, isonetypeof |
trend analysis (C) |
Creation of alternative hypothetical but equally likely future conditions is called |
contingency planning (A) |
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 (D) |
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 (E) |
Porter’s competitive strategies include |
cost leadership, differentiation, cost focus, and focused differentiation |
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 (A) |
An organization that is offering unique, superior products or services to a wide market is pursuing a strategy of |
differentiation (B) |
An example of a firm that pursues a differentiation strategy is |
Bic (C) |
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 (A) |
An organization that keeps costs and prices low in targeting a narrow market is pursuing a strategy of |
cost focus (C) |
An organization that offers unique, superior products or services to a narrow market is pursuing a strategy of |
focused differentiation (E) |
Which of the following carmakers pursues a focused-differentiation strategy? |
Ferrari (A) |
The benefit of the single-product strategy for a company is |
focus (B) |
Time Warner runs different divisions specializing in television, music, and publishing. Time Warner is using a(n) ______ strategy. |
diversification (C) |
Which of the following is most likely to use a diversification strategy? |
A grocery store (D) |
________ 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 (B) |
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 (D) |
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 (D) |
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 |
A recent survey found that the top concern among CEOs worldwide is |
excellence in execution (C) |
According to Bossidy and Charan, effective ______ requires managers to build a foundation for it within three core process: people, strategy, and operations. |
execution |
According to Bossidy and Charan, which business process is most important for effective execution? |
people (B) |
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? (A) |
Which of the following is not a behavior of a leader who executes? |
Respect others limitations (E) |
Bossidy and Charan believe that to excel at execution, a leader should |
probe for weaknesses in the substance and details (D) |
Strategic positioning |
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 |
Strategic management process (five steps) |
1) establish vision and mission 2) establish grand strategy 3) formulate strategic plans 4) carry out strategic plans 5) maintaining strategic control |
Management Chapter 6
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