Business

Question 1

Business Life Cycle Concepts: Introduction

Answer 1

• Company, product, or service new to the market
• Revenue is low because market is unfamiliar with company
• Market resistant to change

Question 2

Business Life Cycle Concepts: Growth

Answer 2

• Market is aware of the company, product, or service

- Revenue increases at a rate consistent with industry

Question 3

Business Life Cycle Concepts: Maturity

Answer 3

• Competition increases as market is saturated with similar products or services
• Revenue remains somewhat stable

Question 4

Business Life Cycle Concepts: Renew

Answer 4

• Organizations may renew by offering new products or services
• Organizations may renew by streamlining business operations to better manage expenses

Question 5

Business Life Cycle Concepts: Decline

Answer 5

• Demand for products or services decrease

Question 6

Porter’s Five Forces: Threat of substitution

Answer 6

• Degree to which it is easy for competitors to attract your company’s customer base
• High threat, adjust pricing strategy, HR promotes cost efficiency
• Low threat, organization has more investment capital, HR promotes entrepreneurial culture

Question 7

Porter’s Five Forces: Threat of entry

Answer 7

• Degree to which it is easy for a new competitor to enter the market
• High threat, HR promotes need for nimble workforce

Question 8

Porter’s Five Forces: Bargaining power of suppliers

Answer 8

• Vulnerability to changes in supply chain vendors/partners
• High bargaining power of suppliers, HR promotes learning and development strategies that improve the workforce’s ability to negotiate and manage risk; desired employees are ethical and can manage effective vendor relationships

Question 9

Porter’s Five Forces: Bargaining power of buyers

Answer 9

• Vulnerability to changes in consumer behavior

- High consumer influence, sales and marketing skills more critical

Question 10

Porter’s Five Forces: Rivalry among existing competitors

Answer 10

• All forces impact rivalry among existing competitors

- Company competitive posture is either weak, tenable, favorable, strong, or dominant

Question 11

Zero based budgeting

Answer 11

Every budget line item starts at zero and must be justified by the leader

Question 12

Incremental budgeting

Answer 12

The numbers from the prior budget are used as a starting point for the current budget. This is the traditional way of budgeting.

Question 13

Formula budgeting

Answer 13

Different units receive different budget percentages.

For example, the decision may be to decrease bonus budgets by 10% across the company. However, executive bonuses may be decreased by 5% while bonuses for the rest of the staff may be reduced by a larger percentage, but they both roll up into a number that is a 10% decrease overall.

Question 14

Activity based budgeting

Answer 14

Budget is based on the value of a service or product for the company.

For example, if a reseller like Amazon makes the strategic decision to sell more Amazon video services, the decision may be to invest a larger portion of the budget to marketing and sales instead of research and development.

Question 15

Balance sheet

Answer 15

Snapshot in time of the company’s financial position

Question 16

Assets

Answer 16

Everything a company owns

Question 17

Liabilities

Answer 17

Everything a company owes

Question 18

Equity

Answer 18

What is left after a company pays all liabilities and liquidates all assets

Question 19

Income statement

Answer 19

Also known as a P&L statement.

Measure of the company’s financial health over a period of time like a year or a quarter.

Question 20

Revenue

Answer 20

Company’s income

Question 21

Expenses

Answer 21

Company’s costs

Question 22

Profits

Answer 22

Difference between income earned and operating costs

Question 23

Statement of cash flows

Answer 23

Report of how much cash a company has on hand, or how liquid the company is

Question 24

Operating activities

Answer 24

Buying and selling of goods and services

Question 25

Investing activities

Answer 25

Gains or losses generated due to the company’s investments

Question 26

Financing activities

Answer 26

Debt or financing a company acquires

Question 27

Profit margin

Answer 27

Revenues - costs = profit margin

Question 28

Earnings per share

Answer 28

(Net income - Dividends on preferred stock)

/

average outstanding shares

Question 29

Return on investment (ROI)

Answer 29

(Investment gains - investment costs)

/

Investment cost

Question 30

Change Management: Cascading approach

Answer 30

Top-down approach

Change happens at the most senior levels of the organization and those changes prompt other changes down to the business units

Question 31

Change Management: progressive approach

Answer 31

Change starts at the top but is shared simultaneously with the whole company. Slowly, changes are made across all the business units.

Question 32

Change Management: Organic approach

Answer 32

Change can start at any level and eventually spreads throughout the organization. It’s a slow process, unless there’s executive sponsorship that accelerates the change throughout the organization.

Question 33

McKinsey 7S Framework

Answer 33

• Strategy
• Structure
• Systems
• Style
• Staff
• Skills
• Shared values

Question 34

McKinsey 7S Framework: Strategy

Answer 34

This is your organization’s plan for building and maintaining a competitive advantage over its competitors.

Question 35

McKinsey 7S Framework: Structure

Answer 35

This is how your company is organized (how departments and teams are structures, including who reports to whom).

Question 36

McKinsey 7S Framework: Systems

Answer 36

The daily activities and procedures that staff use to get the job done.

Question 37

McKinsey 7S Framework: Style

Answer 37

The style of leadership adopted

Question 38

McKinsey 7S Framework: Staff

Answer 38

The employees and their general capabiliies

Question 39

McKinsey 7S Framework: Skills

Answer 39

The actual skills and competencies of the organization’s employees

Question 40

McKinsey 7S Framework: Shared values

Answer 40

These are the core values of the organization and reflect its general work ethic. They were called “superordinate goals” when the model was first developed.