Ch. 2 Strategic Leadership: Managing the Strategy Process

Gina is the founder and CEO of a successful technology firm. In a memo, she informs the company’s employees that remote workers will be required to attend onsite teambuilding events at least once per quarter. In this example, Gina’s authority to institute a policy change is based on

position power.

The CEO of EveryCar was the child of parents who had difficulty making enough money to support their family. As a result, he and his siblings did not have access to many advantages that children from wealthier families had. This CEO, therefore, emphasized making affordable, low-maintenance vehicles that could be bought by low-income households. Which of the following does this example demonstrate?

upper-echelons theory

All Foods is the parent company of several chain restaurants offering a variety of cuisines. The top management at All Foods has decided to enter the frozen foods industry based on its assessment of the profit potential in that industry. Which of the following strategies does this best illustrate?

corporate strategy

TransNational Incorporated is a large conglomerate that operates in 17 different countries. The corporate executives at the headquarters have decided that the company’s objective for the next two years will be to increase its customer equity, or the value of potential future revenues generated by all its customers in a lifetime. Based on this guideline received from the top management team, the product leader of the home audio division has decided to adopt a cost-leadership strategy in all of his 17 units. Thus, the decision made by the product leader best illustrates a ________strategy.

business

EverMart Incorporated is a large company that sells a variety of products such as cosmetics, jewelry, frozen foods, navigation electronics, and airplanes. Apart from this, the company also has a strong presence in the service industry through its chain of dance studios, casinos, and nightclubs. Each of its product divisions operates as an individual business and is responsible for its own profits and losses. Thus, these product divisions under EverMart can be referred to as

strategic business units.

The process that describes the method by which managers conceive of and implement a strategy that can lead to a sustainable competitive advantage is called

strategic management.

Visionary companies differ from their competition in that

employees in visionary organizations find meaning in their work and are motivated.

Visionary companies are able to outperform their competitors because

they provide more aspirational visions.

The first step to gain and sustain a competitive advantage is to

define an organization’s vision, mission, and values.

Which of the following vision statements is most likely to produce a sustainable competitive advantage for a boat dealership?

to help our customers find the perfect boat for their individual needs

Do vision statements help firms gain and sustain competitive advantage?

It depends, because the effectiveness of vision statements differs by type.

Which of the following is an example of a business acting upon an organizational core value?

HarborTech Electronics requires all suppliers to undergo independent labor audits despite a subtle delay to the supply chain.

What is the strategic management process?

Strategic leaders design a method to formulate and implement strategy.

Homestyle is a company that manufactures and sells home furniture. It sources its materials from another country to keep costs low. An assembly line worker in one of its manufacturing centers noticed that there was increasing concern regarding the potential toxicity of the flame-resistant materials used in the furniture. In response, she compiled a list of nontoxic flame-resistant materials that the company could use. When her manager learned about this, he presented the prospect and got it approved from the top management team. This is an example of the

planned emergence approach.

The executives at Dizzy Corporation are developing strategic plans to address plausible future situations like an increase in the prices of cotton and synthetic fabrics by 20 percent, appreciation in the value of the dollar, increase in the cost of labor by 30 percent, and increase in demand for the company’s products. By doing so, the company will be well prepared with its planned responses if any of these situations occurs in the future. Thus, Dizzy Corporation is employing ________as the approach to the development of strategy.

scenario planning

Understanding the Resource Allocation Process (RAP) can significantly shape a firm’s realized strategy and result in an emergent strategy. Which of the following best illustrates this?

General Motors redirected scarce semiconductor chips during the Covid-19 pandemic to its high-margin SUVs and trucks rather than producing lower-margin sedans.

Aurora Watches became famous in the 1980s for selling luxury timepieces endorsed by Hollywood celebrities. For decades, the brand relied on the prestige of celebrity marketing to maintain high margins. However, as younger consumers began to view watches less as luxury status symbols and more as everyday accessories, sales of Aurora’s premium lines dropped sharply. The company continued to hire well-known actors and athletes for advertising campaigns, confident this would restore its former appeal. Despite heavy spending, sales kept falling as customers turned to affordable, fashion-oriented brands instead. What situation best describes the contradiction between Aurora’s beliefs about its market position and the evidence in consumer behavior?

strategic dissonance

Constraints such as time or the brain’s inability to process large amounts of data that prevent us from appropriately processing and evaluating each piece of information we encounter are known as

cognitive limitations.

BrightWave Apparel, a clothing retailer known for affordable casual wear, had built a loyal following among college students and young families. To boost profitability, CEO Martin Lee pushed his executive team to reposition the brand as a premium fashion label targeting urban professionals. Inspired by Lee’s prior success with another retail chain, the leadership team voiced strong support for his vision. They approved higher price points, luxury store layouts, and advertising campaigns featuring high-end models—while scaling back the budget lines that had sustained BrightWave’s popularity. After these changes, sales plummeted and core customers abandoned the brand. What cognitive bias best explains the leadership team’s failure to challenge the CEO’s assumptions?

groupthink

The two detailed courses of action generated in Step 1 of the dialectic inquiry decision framework are known as

thesis and antithesis.