BUAD 453 Exam 1

competitive advantage

the ability of a firm to outperform its rivals by achieving greater profitability and growth than others in the industry is an example of _____________.

maximizing the return to shareholders is to focus on the customers and employees

A tech company determines that it should pay its top-performing employees above-market wages, decreasing shareholder returns in the short-term. But the employee longevity pays off through sustained R&D and breakthrough products that result in sales growth and lower recruitment costs. This is an example of:

sustained competitive advantage

a company in the airline industry with an ROIC recorded above 25% in each of the last 5 years is an example of ___________________________.

The strategic goals of the organization will include a combination of performance goals toward the charity's mission, revenue, and fundraising goals.

a nonprofit organization is considering holding a series of sessions to develop its mission, vision,goals, operation model, and strategic plan. Differentiate between planning for charities vs for companies. How will the process be different for the nonprofit?

a strategic manager who is the head of an entire division, responsible for translating the corporate strategy into concrete strategies for the business unit.

A business-level manager in a multi-divisional company is:

Bhascar works with managers within his business to develop and implement concrete strategies for his division that align with corporate goals.

Bhascar recently named general manager of a newly created business unit of a multidivisional company. His first order of business will be to implement the new division's strategic plan. Which of these statements about Bhascar's responsibilities for the company is true?

functional-level manager

Lisa is the VP of sales and marketing for a software development company. She's been working with her sales force in recent months to develop a promotion strategy to sell obsolete software quickly at a reduced price rather than the original suggested price. Which strategic manager role is Lisa fulfilling with this approach?

defining the company's corporate mission and major corporate goals

According to Hill and Schilling, which would be considered an important step in a formal strategic management process?

what the company does in terms of its customers, their needs, and through what core competencies.

a mission statement describes:

customer-focused

Nike: "To bring inspiration and innovation to every athlete in the world."

this is an example of a _______________ mission statement

the feedback loop

the idea that the strategy-making process is constantly ongoing and adapting over time with the input of additional information is:

well-constructed goal

My company has set a goal of launching five new products each year for the next five years through at least 10% annual investment in R&D.

This is characteristic of a:

identify strategies that exploit external opportunities, counter threats, build on strengths, and eradicate weaknesses.

The primary objective of managers participating in a SWOT analysis is to:

local commercial properties are most often served by one of the three big national HVAC service firms and a handful of local smaller firms.

An HVAC contractor is considering expanding into a new business line, offering commercial facility maintenance and service in addition to construction contracting services. As the contractor considers this potential strategy, it conducts a strategic planning process for this business unit, analyzing external and internal factors. Which of these can be classified as a part of the external operating environment of the company?

A general manager defining a superior customer service strategy for his division to better deliver its products

There are four main categories of strategies that managers may define to create and sustain a competitive advantage. What is an example of a business-level strategy?

Define emergent strategy making process

Strategies that evolve as the unplanned responses to unforeseen circumstances, arising from autonomous action by individual managers, serendipitous events, and changed circumstances

• attaching too much importance to the role of top management and ignoring the input and strategic ideas of lower-level managers

• failing to take advantage of opportunities that arise that were unplanned for within the company's strategic plan

refusing to adapt to breakthrough technologies and shifts in the competitive environment because the strategic plan didn't account for these changes.

What are some common pitfalls of the strategic planning process?

an "ivory tower" approach could lead the executive team to a plan created in a vacuum without an understanding of current operating realities.

Michael is the CEO of a multidivisional company who has determined that it is time for his company to revisit its strategic plan. He is working on the agenda for the meeting and is beginning with a review of the company's mission, vision, and values. On day 2, he plans to conduct an analysis of internal and external forces affecting the company. His invitee list for the strategic planning session includes the CFO, the COO, the Vice President of Human Resources, and the Vice President of Sales. He believes this smaller team will be able to reach a greater consensus and be efficient in developing the strategic plan for the next five years. Which potential pitfall could impact the strategic plan for this company?

create a what-if scenario for the future and develop strategic options associated with that future state

Scenario planning is one methodology strategic managers can use to avoid pitfalls in their planning process. In scenario planning, managers:

Devil's advocacy: Adriana could have assigned one member of the team to argue strongly against the prevailing strategy, identifying potential flaws in the plan.

Adriana is vice president for product management at a Brazilian-based skin care company. As a functional leader, she led a strategy planning process with her team to create a new tan-enhancing cream. After a thorough strategy process, she and her team built consensus around a deployment plan for this new product. They introduced the tan enhancer to a regional segment of the marketplace as a prototype. Sales were dismal. After some focus groups, the team learned that consumers were not interested in it.

But Adriana didn't give up, insisting her team continue to promote the product. She pushed her deployment plan and launched it in the entire market, along with a robust and expensive television and magazine ad campaign. Just like during the regional trial, it was a dismal failure with very limited sales. The executive team suggested that Adriana's strategy planning was flawed in selecting this type of new product as the core of her strategy. Consider the potential techniques for improving decision making that Adriana could have utilized to avoid defects in her planning process.

prior hypothesis bias

illusion of control

escalating commitment

representativeness

astute use of power

What are some cognitive biases that can lead to poor strategic decisions?

representativeness

Robert is the manager of sales and marketing for one of the products offered by his organization. He was invited to participate in the strategic planning process for launching a new type of sunglasses to the millennial market. Robert, age 25, was excited to be able to contribute to this product because he liked these new sunglasses and, when he showed them to his three best buddies, they also liked them. During the planning session, Robert convinced the team that they did not need to conduct expensive focus groups to test the viability of the sunglasses. He was convinced the glasses would sell because every time he wore a pilot pair of the sunglasses, he got lots of compliments on them. Ultimately, the management team decided to go with his strategy and did not conduct focus groups before launching the new product. Which cognitive bias was at work in this situation?

So that they can identify them when they are having an impact on the planning process and analyze whether the decision is being made strategically or relying on a "rule of thumb" or heuristic

Why should strategic managers pay attention to cognitive biases and be able to recognize them in their strategic planning process?

• Creating a plan and an alternate plan using dialectic inquiry to better understand the complexity and implications of a decision

• Comparing a strategic plan against previous similar plans and reviewing the results of those experiences to gain an outside view

• Presenting an alternative viewpoint, also called devil's advocacy

What are some means of improving decision making?

the overconfidence of leaders in their ability to create value by acquiring another company.

The hubris hypothesis of takeovers is a term that describes:

• Willingness to Delegate and Empower

• Being well informed

• Commitment

• Outside view

Experts who study strategic leadership have identified the key characteristics of high-performing leaders. What are some characteristics for strategic leadership?

Self-regulation

Emotional intelligence is a term used to describe a group of psychological attributes that strong and effective leaders exhibit. What is an emotional intelligence attribute?

Jeffrey Pfeffer explains that ultimately a manager's power comes from his or her control over resources, such as budgets, capital, positions, information, and knowledge.

A leader's use of power can influence his or her overall effectiveness as a strategic manager. Which of these statements is true?

He should start by complimenting the team on their hard work on the project so far and then explain that the company is shifting direction and is no longer pursuing the project. He should have as much information as is available for the employees on how this change will affect their job status.

Christopher is a mid-level manager who has been working with an executive coach to become a better leader within his organization. One of the goals has been to develop his emotional intelligence. Recently, he scheduled a meeting with a challenging objective - to inform his team of employees that the executive team has decided to abandon the project they've been working on. When he discusses the situation with the team, how should he demonstrate emotional intelligence?

commitment

Logan is an entrepreneur with a new idea for a software product. His start-up company grows quickly to a team of about 25. A new federal law recently passed by Congress will cause the software to become obsolete without a major change in the programming. The investment in the programming is going to be costly, and the company faces some hard choices. Logan announces that he will get back to his roots as a programmer to work alongside the software development team, taking the salary of a programmer, to ensure that the newest version of the software will be compliant with the new law. Which of these characteristics of an effective leader is Logan demonstrating the most?

• risk of entry by a potential competitor

• closeness of substitutes to an industry's products

• bargaining power of suppliers

The extended competitive forces model includes all of the following forces that shape competition within an industry:

areas of threat and areas of opportunity that can serve as the basis of strategy formulation and implementation.

An analysis using the competitive forces model of an industry can indicate:

bargaining power of buyers

An industrial tool manufacturer relies on a distributor network with the largest online outlet and store network aimed at construction workers. The distributor network is seeking a manufacturer to provide them with private label products. They've decided they will offer only their own product line and not any other brand in this category of industrial tools. Now, the industrial tool company must decide whether or not to agree to this proposition or lose this company as a customer. This is an example of which of the competitive forces at play in this industry?

Production costs are high and require high volumes to achieve profitability.

Potential competitors may enter an industry and begin to take market share from existing companies. What would be one of the largest challenges a new entrant would need to overcome to be successful when entering the industry?

identifying an industry by the customers that it serves and the needs it fulfills rather than by the products it sells and staying focused on ensuring its products meet those needs.

Companies can reduce the impact of the substitute products force in the competitive forces model by:

customer switching costs

Through research and development, a cable company has found a way to use its existing network lines to serve customers with a new product offering - home security systems. The company is offering the service for a lower monthly fee than most security companies. However, the sales force didn't see a lot of interest among its customers who had an existing security system from a competitor until they ran a promotion for reduced prices on equipment and free installation. Which of the competitive forces is at play?

a company would experience switching costs if it chose to utilize a different supplier because the current supplier's products are unique.

Suppliers are most powerful when:

suffer from excess capacity and price wars

Industry competitive structure identifies the number and size of companies. Fragmented industries often:

Utilize an intensive advertising campaign to build brand loyalty.

Jonathan's mobile communications device company is conducting an industry analysis as it considers new strategies for its five-year strategic plan. The analysis reveals that recent government deregulation has reduced the barriers to entry and several start-ups are entering the industry. Which of these strategies could be a part of the plan to counteract this?

Risk of entry by potential competitors: BrightView may be able to lessen the impact of this force in a low-barrier industry through economies of scale, specifically discounts on bulk purchases of raw material inputs.

The country's largest landscape company, BrightView, a $2 billion firm, is the result of a merger between two multi-state firms, Brickman Group and ValleyCrest, in 2015. The company is operating in a fragmented industry dominated by small, local businesses. Which of the following identifies a relevant competitive force and a way the company might leverage it?

companies within the same industry may position themselves differently regarding distribution channels, market segments, and other differentiators, which affects their strategies.

Strategic groups exist because:

its closest competitors, companies within the same strategic group.

The most immediate threat to a company's profitability comes from:

By competing in the same strategic group, the two companies are dealing with customers who view their products as direct substitutes for each other.

In the toy industry, Mattel is one of the world leaders with its line of Barbie dolls. However, it has faced competition from MGA Entertainment with its Bratz dolls since the 1990s. Which of these statements is true about the strategic group in which these companies compete?

defining the new company's industry and strategic group.

Ramon works for a large company that is considering starting a new business unit to sell personalized coffee mugs. He has been tasked with the preliminary research for the industry analysis. His analysis should begin with:

strength of the competitive forces in the industry change.

As an industry environment evolves over time, the:

growth

An industry that is attracting large numbers of new customers through increased interest and education is:

Complementors: The industry will likely have few complementors, with few products available that would add value when used in combination with the product or service.

In reviewing the competitive forces model through an industry life-cycle analysis, which of these could be true of an embryonic industry?

They must learn to recognize the crucial points in an industry's development to forecast and strategize for the future.

Why should strategic managers be concerned with the life cycle of the industry in which their companies operate?

A frequent shopper card for grocery store customers that tracks their purchases and automatically offers discounts on the products they buy most often

During the shakeout stage, companies are in fierce competition. Which of these might be an effective strategy in an industry experiencing the shakeout stage?

mature phase

Market saturation is an indication that an industry has entered the:

The company should monitor prices of similar products at other discount membership stores, such as Costco and Sam's Club, matching prices to maximize profitability and avoid a price war.

A discount membership general merchandise store has been educating customers about its business model of a membership fee based on the volume of products they buy. The store has been focused on reducing cost through the development of its supply chain and inventory systems. What would you add to the company's strategy as the industry moves from the shakeout phase to the mature phase?

Employee performance management software

Which of these is an example of a product or service in an industry operating in the growth phase?

Industries will not always travel through the stages in a predictable way.

The industry life-cycle analysis has several potential limitations. Which of these is a limitation that strategic managers should be aware of?

The global mass transit industry is reshaping as people in developed countries seek environmental benefits and those in developing nations look for ways to serve dense populations.

Michael Porter's theory of punctuated equilibrium suggests periods of freezing and reshaping of industries. Which of these represents a formerly declining industry now in a reshaping period?

economic, global, technological, demographic, social, and political context within which a company operates.

An analysis of the macroenvironment includes the:

the health of a country's economy, measured by growth rate and other factors, can affect both the customers' ability to purchase products and the price they're willing to pay.

Where a company operates and sells its product can have an impact on its profitability because:

both creative and destructive, making established products obsolete overnight and creating new product possibilities at the same time.

The pace of technological change has accelerated. Technological forces can have an impact on the macroenvironment, creating conditions that are:

The network will build a blended-use community that offers independent retirement living, assisted living, and skilled nursing care.

The Baby Boomer generation is aging. A local healthcare network is looking at several expansion strategies. Which strategy might be the best response to this demographic force in the macroenvironment?

Political and legal forces

A telecommunications company is impacted by government regulations of the wireless spectrum, cell tower locations, and Internet accessibility. The company decides to hire a lobbying firm to represent its interests with the U.S. government, specifically the FCC, FTC, and Congress. This is an example of a company managing which forces in the macroenvironment?

taking advantage of a macroenvironment force to attract new customers and increase sales?

A travel website advertises that now is a great time for Americans to visit Europe because the strength of the U.S. dollar abroad enables tourists to spend less for a great experience.

This is an example of:

firm-specific strengths that allow a company to differentiate its products from rivals or achieve lower costs than rivals.

A competitive advantage is based on the possession of distinctive competencies. By definition, these are:

both the physical elements of production, such as machines and workforce, and the knowledge and expertise of how to make and sell a product or service.

A firm can develop its competitive advantage through its resources. Resources include:

supervise the filing of appropriate patent paperwork for the new medication to protect the company's intellectual property.

Candace is the research and development manager at a pharmaceutical company. The firm is in the process of developing a new heart medication that could be more effective than existing treatments for several heart conditions. To ensure the company's profitability after the new medication is cleared by the FDA, Candace should:

a distinctive competency.

A grocery store chain makes a decision to limit its size and scope by offering only what it considers to be the best product in each food category, reducing the options available to its customers. It employs and recruits a highly paid team of tasters who travel the world evaluating foods to introduce on its shelves. It has attracted a team with an excellent track record of identifying top sellers and earned a reputation for delivering high-quality goods. This is an example of:

Toyota's lean manufacturing systems

Compare the resources for each of the following four companies. Which resource represents an advanced factor of production, specifically a competency in process knowledge?

a. Starbucks' locations in downtown areas

b. General Motors' union workforce

c. Kellogg's food processing equipment

d. Toyota's lean manufacturing systems

process knowledge or organizational architecture that are path dependent and the consequence of the history of the company.

Rare resources include:

take steps to protect these assets either formally or as a trade secret, optimize the company's use of them, and not outsource them to other firms.

Advanced factors of production are more likely to be rare and harder to imitate. Strategically, managers who have identified these advanced factors should:

casual ambiguity

A company's rare and valuable process knowledge elements can be hard to copy because they are often unwritten, spread among many team members, and kept secret within the firm. This is an example of:

evaluate each resource to determine whether it can help the company take advantage of opportunities in the industry, whether it's a resource that competitors don't have or would have trouble copying, and whether the company is managing the resource.

Your supervisor has asked you to take the lead in performing a VRIO analysis of the quality of the resources within your company. To perform the task, you must first identify the land, labor, management, plant and equipment, organizational architecture, process knowledge, and intellectual property that make up the resources of the company. Then:

Nike's swoosh logo

Compare the identified resources for each of the following four companies. Which company's resource could be considered valuable, rare, inimitable, and organized?

the value customers place on the company's products, the price it charges for its products, and the costs of creating its products.

A company's profitability depends on:

it is impossible to offer products to each customer at the exact price at which he or she values it because customer definitions of value will vary.

The price of a product or service is typically less than the customer's perceived value for the product because:

setting the price for this product line higher than that of its typical offering because of the increased perceived value by customers.

Sasha is a manager for an ice cream company. The company recently developed a delicious, low-calorie version of its product. At current volumes, the per-gallon cost is the same to produce this new line as to produce its traditional ice cream, and the new ice cream is produced on the same equipment. The company could improve profitability by:

the customer is assigning a greater value to the summer ale and the company can increase its price to gain profitability.

A small brewery is working to determine the appropriate price for some of its products to achieve competitive advantage and greater profitability. In the past, the brewery released a summer ale at the same price as its regular year-round beer. In the last three summers, the company sold out of the beer by early August. If the company raises its summer ale price and it continues to sell at a steady pace, this is a sign that:

The company's operations team identifies ten improvements to the production process that will reduce the per-car manufacturing cost for each vehicle off the line.

A building block of a competitive advantage can impact profitability by accomplishing one of three goals - increasing value as perceived by customers, allowing the company to increase the price it charges, or reducing the costs of producing products. Which of these actions by a car manufacturer would be part of a short-term strategy for increasing profitability through value creation, price increase, or cost reduction?

value is added to the product at each stage in the value chain.

A company's functional activities transform its inputs into outputs, and:

primary activities in the design, creation, and delivery of a product and support activities.

A value chain includes:

developing new products, enhancing existing products, and improving processes to reduce the production cost for existing products.

Research and development is one area of the value chain dedicated to: