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CPP own flashcards > Business Principles Garima's Deck > Flashcards

Business Principles Garima's Deck Flashcards

1
Q

What is management?

A

A set of activities directed at the efficient and effective utilization of resources in the pursuit of one or more goals. It involves coordinating and overseeing the work activities of others so it is completed efficiently and effectively.

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2
Q

What is an organization?

A

A deliberate arrangement of people to achieve a specific purpose.

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3
Q

What are the primary elements of an organization?

A
  1. Mission, 2. Vision 3. Core values 4. Stakeholders
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4
Q

What are the common characteristics of an organization?

A
  1. Distinct purpose
  2. People
  3. Deliberate structure
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5
Q

Scientific management - reduce operating cost to make manufacturing more efficient. This approach is attributed to whom?

A

Frederick Taylor

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6
Q

What is the full form of PODSCORB? or Henry Fayol suggested the role of managers is to perform basic functions. What are these functions?

A

Planning,
Organizing,
Directing
Staffing,
Coordinating,
Reporting, and
Budgeting

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7
Q

What are the range of skills a manager must have?

A

Technical, interpersonal and conceptual

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8
Q

What are the five types of risks to businesses?

A
  1. Strategic risks
  2. Financial risks
  3. Operational risks
  4. Regulatory risks
  5. Reputational risks
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9
Q

What are the different theories of leadership?

A
  1. The great man theory
  2. Trait theory
  3. Situational theory
  4. Behavioural theory
  5. Competency theory - new paradigm
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10
Q

What is a leadership style?

A

Behaviour of leaders that focuses on what they do and how they act.

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11
Q

What are the three leadership styles

A

authoritarian, democratic, and laissez-faire

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12
Q

What are the five fatal flaws of derailed leaders?

A
  1. Inability to learn from mistakes
  2. Lack of core interpersonal skills and competencies
  3. Lack of openness to new ideas
  4. Lack of accountability
  5. Lack of initiative.
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13
Q

Fill in the blanks: Triple bottom line involves the interaction of _____, _______ and _______.

A

People
Planet
Profit

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14
Q

What are the six factors which are important in leadership ethics?

A
  1. Character
  2. Actions
  3. Goals
  4. Honesty
  5. Power
  6. Values
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15
Q

What is critical thinking?

A

It is the use of knowledge and intelligence to arrive at justifiable positions on which to base decisions.

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16
Q

What is the law of parsimony or Occam’s razor?

A

When faced with a lot of possibilities, the simplest explanation is usually the best. KISS - Keep it simple, stupid.

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17
Q

What questions can jump start the critical thinking process?

A

1.Does ambiguity, vagueness, or obscurity hinder your full understanding of the argument?
2.What is the source of your information?
3.How comfortable are you with its accuracy?
4.What assumptions led to your conclusion?
5.Is the conclusion consistent with the data?
6.Are there alternative explanations?
7.Have you evaluated the relevance, fairness, completeness, significance, and sufficiency of the reasons to support the conclusion?
8.In what ways might your thinking have been in error?
9.Did you miss anything?
10.What are the implications of being wrong?

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18
Q

What are cognitive biases?

A

Systematic errors in thinking that can influence our perception and lead to poor decision-making.

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19
Q

What are the different types of cognitive biases?

A
  1. Attributional error
  2. Overconfidence bias
  3. Anchoring effect
  4. Selective perception
  5. Confirmation bias
  6. Escalation of commitment
  7. Framing effect
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20
Q

What is intuition?

A

Intuition is a combination of factors that are the result of accumulated judgment.

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21
Q

What are heuristics?

A

Rules of thumb used to simplify decisions.

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22
Q

What is hindsight bias?

A

To expect that decisions cannot turn out to be bad.

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23
Q

What is decision making?

A

The process of making a choice from available alternatives.

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24
Q

What are the two types of decision making problems?

A
  1. Well structured
  2. Ill structured
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25
Q

What are programmatic decisions?

A

Repetitive decisions that can be handled by a routine approach.

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26
Q

What are the styles of decision making when addressing ill structured problems?

A
  1. directive style,
  2. analytical style,
  3. conceptual style, and 4. behavioral style.
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27
Q

What are the three conditions under which decision making occurs?

A
  1. Certainty
  2. Uncertainty
  3. Risk
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28
Q

What is uncertainty?

A

A situation in which the decision maker has no available probability estimates.

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29
Q

What is unbound rationality?

A

Rational decision-making limited by the decision maker’s ability to process information.

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30
Q

What is satisficing?

A

Accepted solutions to problems that are “good enough.”

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31
Q

What are the eight steps to decision making?

A
  1. Identifying the problem
  2. Identifying decisional criteria
  3. Developing alternatives
  4. Allocating weights to the alternatives
  5. Analyzing the alternatives chosen
  6. Selecting the alternatives
  7. Communicating and implementing the the chosen alternatives
  8. Evaluating the decision effectiveness
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32
Q

What is groupthink?

A

A pattern of thought characterized by self-deception, forced consent, and conformity to group values and ethics.

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33
Q

What are the common symptoms of groupthink?

A
  1. Illusion of invulnerability (we are on the side of good)
  2. Collective rationalization (we only do what is right)
  3. Shared stereotypes of others (they do not know)
  4. Diminishing opponents (they are wrong)
  5. Lack of criticism of group members.
  6. Illusion of unanimity
  7. Pressure on dissenters to confirm (get on board)
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34
Q

What is Abilene Paradox?

A

The social phenomenon in which a group collectively decides on a course of action that is counter to the preference of many or all the individuals in the group.

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35
Q

How can dysfunctional group decisions be avoided?

A
  1. Challenge the decisional process
  2. Balance advocacy with inquiry
  3. Recognize personality traits that can hijack a process
  4. Avoid a spiral of silence
  5. Seek a devil’s advocate
  6. Let group members disagree or take unpopular positions
  7. Realize that leadership is a factor in group decisions
  8. Consider using outside experts.
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36
Q

What is big data?

A

The vast amount of quantifiable information that can be analyzed by highly sophisticated processing.

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36
Q

What is AI?

A

The theory and development of computer systems to perform tasks that normally require human intelligence and include visual perception, speech recognition, decision-making, and translation between languages.

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37
Q

What are the factors involved in decision making?

A
  1. Decision making conditions
  2. Decision makers’ style
  3. Biases and errors
  4. Decision making approach
  5. 8 step decision making process
  6. Types of problems and decisions.
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38
Q

What is a strategy?

A

A goal-oriented set of plans and actions that enable a business to compete effectively or A theory about how to gain competitive advantage

In business, strategy is a set of goal-oriented plans and actions that better enable a company to compete.

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39
Q

___________ is a sequential set of analysis and decision choices

A

Strategic management process. It is linear.

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40
Q

What are the requirements of a strategic management process?

A
  1. Establishing vision, mission and core values
  2. Setting objectives
  3. Crafting a strategy
  4. Executing strategy efficiently and effectively
  5. Monitoring developments, evaluating performance, and initiating corrective actions.
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41
Q

What are the foundational aspects of a company?

A

Vision, mission and core values.

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42
Q

What is a strategic vision?

A

Management’s aspirations for the company’s future and the course and direction charted to achieve them. It answers the question “where we are going.” It is about future aspiration.

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43
Q

What is a mission statement?

A

a statement of the company’s long-term purpose that explains the overall reason the company exists. It answers, “who we are, what we do, and why we are here?”

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44
Q

What are goals?

A

The desired outcomes

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45
Q

What are objectives?

A

Measures of progress being made toward a goal. Objectives are specific and measurable.

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46
Q

When management is looking for ______ objectives or goals, they are looking for those that are realistic, challenging and achievable.

A

stretch

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47
Q

What are do’s of SWOT analysis?

A
  • Be analytical
  • Record all thoughts and ideas
  • Choose the right participants
  • Think inside and outside the box
  • Recognize the context
  • Be aware that things change
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48
Q

What are don’ts of SWOT analysis?

A
  • Try to disguise weaknesses
  • Forget that external influences are uncontrollable and may require adaptation
  • Exclude people who are not on board with your thinking
  • Ignore the way choices influence plans and strategies
  • Use it as an exercise to blame others
49
Q

The execution of security strategy can result in a comparative advantage for a company, just not a competitive advantage.
TRUE or FALSE

A

TRUE

50
Q

How to implement a strategy? (What the the 10 steps?)

A
  1. Ensure effective business-wide communication.
  2. Staffing
  3. Develop & strengthen strategy supporting resources & capabilities
  4. Allocate resources
  5. Set policies and procedures
  6. Organize work efforts for best results
  7. Install information & operating systems
  8. Motivate by R&R
  9. Create an organizational culture
    10.. Exert internal leadership.
51
Q

What is cost leadership?

A

Any money spent on doing business must be focused on the least cost possible to achieve the desired outcomes. Example of companies which use this business strategy includes McDonalds, Walmart, Southwest Airlines.

52
Q

What is differentiation strategy?

A

The company will embrace higher costs to enable the development of unique, quality products or services for which the company can receive a premium payment. Example, Apple, BMW, Nordstrom

53
Q

What is the difference between intended strategy, emergent strategy and realized strategy.

A

Intended - chosen strategy the firm thought they were going to pursue.
Emergent - strategy adapted to the situation.
Realized - strategy a company actually possesses.

54
Q

What are the tests to check if a strategy works?

A
  1. Fitness test
  2. Competitiveness test
  3. Performance test
55
Q

What is the full form of VRIN (a company can achieve competitive advantage by having a product/service known as VRIN)

A

Valuable
Rare
Inimitable
Non Substitutable

56
Q

Define economic value

A

The amount of money someone will pay for a good or service in excess of the cost of production.

57
Q

What is a business cycle?

A

Natural rise and fall of economic growth over time

58
Q

What are the four stages of a business cycle?

A

Expansion, Peak, Contraction, Trough

59
Q

What is a five force framework?

A

A model that identifies and analyzes competitive forces that directly shape every industry and determine an industry’s weaknesses and strengths. It includes:
1. Competition from rivals
2. Competition from new entrants
3. Competition from producers of substitute products
4. Supplier bargaining power
5. Consumer bargaining power

60
Q

What is strategy group mapping?

A

The best technique for revealing the market positions of industry competitors

61
Q

What is strategic group analysis?

A

A technique for identifying different market or competitive positions that rival firms occupy in the same industry.

62
Q

What are the four dimensions in the framework for competitive analysis?

A

Current strategies
Objective
Resources and capabilities
Assumptions

63
Q

What are the fundamental building blocks of a firm’s competitive strategy?

A

Resources and capabilities.

64
Q

What are dynamic capabilities?

A

Improving or modifying existing resources and capabilities to create new ones.

65
Q

Distinguish between competency, distinctive competency and core competency.

A

A competency is an activity that a company has learned to perform with proficiency.
A distinctive competency is a capability that enables a company to perform a particular set of activities well, often better than rivals.
A core competency is an activity that a company performs proficiently and that is also central to its strategy and competitive success.

66
Q

What is value chain?

A

The value chain identifies all the primary and secondary (support) activities of a company that are used to create customer value and company profitability.

67
Q

What is benchmarking?

A

Benchmarking is a tool for assessing whether the costs and effectiveness of a company’s value chain activities are in line with those of others.

68
Q

What are the different types of strategy options?

A
  1. Broad Low cost provider strategy
  2. Broad differentiation strategy
  3. Focused low cost strategy
  4. Focused differentiation strategy
  5. Best cost provider strategy.
69
Q

Name 10 cost drivers (of broad low cost provider strategy)

A
  1. Capturing economies of scale.
  2. Learning & Experience
  3. Capacity Utilization
  4. Supply chain efficiency
  5. Input costs
  6. Production, technology & design
  7. Communication systems and IT
  8. Bargaining power
  9. Outsourcing or vertical integration
  10. Incentive system and culture.
70
Q

What are the eight value drivers (of broad differentiation strategy)?

A
  1. Product features & performance (Apple)
  2. Customer service (Best Buy)
  3. Production R&D (Vistaprints)
  4. Technology & innovation (Pfizer)
  5. Pursue continued improvement in Input quality (Lexus)
  6. Increase Marketing & Brand building activities (Coke vs Pepsi)
  7. Seek higher quality input (Starbucks)
  8. Improve skills, expertise and knowledge of personnel (Alphabet/Google)
71
Q

What is a Profit & Loss Statement or income statement?

A

It is a financial document that summarizes the revenues, costs, and expenses incurred during a specified period of time.

72
Q

What is a balance sheet?

A

The balance sheet displays the company’s total assets, and how these assets are financed – through debt or equity.
Assets = Liabilities + Equity.

73
Q

What is a cash flow statement?

A

It describes the cash flows into and out of the organization. It represents the company’s net earnings after expenses have been deducted from total sales. This might also be called “profit” or “the bottom line.”

74
Q

What is Profit?

A

Profit, in basic business usage, is the excess of total revenue over total cost — the difference between the amount a business earns and what it spends — during a specific period of time.

75
Q

What is the renowned bottom line?

A

Net income

76
Q

What is the formula of net income?

A

Net Income = Net revenues minus expenses, interest, and taxes.

77
Q

Can a company cover its short term liabilities if the operating cash flow ratio is 1.5 or 2?

A

Yes.

78
Q

Can a company cover its short term liabilities if the operating cash flow ratio is less than 1?

A

No

79
Q

What is the formula of operating cash flow ratio?

A

Operating Cash Flow Ratio = Cash Flow from Operations / Current Liabilities

80
Q

What is the formula of gross margin ratio?

A

Gross Profit Margin Ratio = (Gross Profit ÷ Sales) × 100

81
Q

What is more important? Gross Profit margin ratio being high or not fluctuating?

A

A primary consideration is the stability of this ratio. So it is important that it should not fluctuate. It is good if the gross profit margin is high.

82
Q

What is the formula of operating profit margin ratio?

A

Operating Profit Margin Ratio = (Operating Income ÷ Sales) × 100

83
Q

Which is the best ratio to compare a company’s returns to others in the industry?

A

Operating profit margin ratio as it shows the ability to turn sales into pre-tax profit.

84
Q

What is the formula of net profit margin ratio?

A

Net Profit Margin Ratio = (Net Income ÷ Sales) × 100

85
Q

Which profit ratio is used for an industry comparison?

A

Net profit ratio

86
Q

What does higher ROI percentage indicate?

A

The company can earn income efficiently using its available assets.

87
Q

What is the formula for Returns on Assets?

A

Return on Assets = (Net Income Before Taxes ÷ Total Assets) × 100

88
Q

What is the formula for Returns on Investment (ROI)?

A

Return on Investment = current value of an investment – cost of the investment ÷ cost of the investment

89
Q

What measures the growth of an investment?
Returns on Assets (ROA)
Returns on Investment (ROI)
Internal Rate of Return (IRR)

A

Internal Rate of Return (IRR)

90
Q

True or false:
If the IRR of a new project exceeds a company’s required “hurdle rate” — that project will most likely be accepted. If IRR falls below the required hurdle rate, the project should be rejected.

A

True

91
Q

Riskier projects generally have higher hurdle rates. True or False?

A

True

92
Q

What is hurdle rate?

A

The rate of return that is the net gain of an investment over a specified time period, expressed as a percentage of the investment’s initial cost.

93
Q

What is current ratio? It is also known as the working capital ratio

A

The current ratio measures a company’s ability to pay short-term obligations — those due within one year.
Current Ratio = Current Assets ÷ Current Liabilities

94
Q

What is debt ratio?

A

The debt ratio measures the amount of leverage used by a company in terms of total debt to total assets.
The formula for the debt ratio is:
Debt ratio = Total Debt ÷ Total Assets

95
Q

True or false: A debt ratio greater than 1.0 (100%) tells you that a company has less debt than assets.

A

False

96
Q

Which ratio is used to evaluate a company’s financial leverage? What is its formula?

A

debt-to-equity (D/E) ratio
Debt-to-Equity Ratio = Total Liabilities ÷ Total Shareholders’ Equity

97
Q

True or false? Higher leverage ratios tend to indicate a company or stock with higher risk to shareholders.

A

True

98
Q

True or false: When one refers to a company, property, or investment as highly leveraged it means they have more debt than equity.

A

True

99
Q

What is an investment strategy of using borrowed money?

A

Leverage

100
Q

What is return on equity? (ROE)

A

ROE = Net Income ÷ Equity

101
Q

Which metric is used to evaluate a company’s operating performance?

A

EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It is considered a proxy for cash flow.
EBITDA = net income (net earnings) + interest + taxes + depreciation + amortization

102
Q

True or false? EBITDA can be used to analyze and compare profitability among companies and industries, as it eliminates the effects of financing and accounting decisions.

A

True

103
Q

True or false: Firms with a high debt to EBITDA ratio and unable to service their debt in an appropriate manner may find themselves with a lowered credit-rating.

A

True

104
Q

A move to diversify into a new business is usually weighed by passing three tests of corporate advantage. What are these tests?

A
  1. Industry or market attractiveness test
  2. The cost of entry test
  3. The better off test.
105
Q

What questions should be ask to choose how to enter a new business?

A
  1. Does the company have all the resources and capabilities it requires to enter the business ?
  2. Are there barriers to overcome and what are they?
  3. Is speed an important factor in the firm’s chances for successful entry?
  4. Which is the least costly mode of entry, given the company’s objectives?
106
Q

What is unrelated differentiation?

A

Unrelated diversification involves entering businesses that have dissimilar value chains and resource requirements, with no competitively important cross-business commonalities at the value chain level.

107
Q

What are misguided reasons for pursuing unrelated differentiation?

A
  1. Risk reduction
  2. Growth
  3. Stabilization
  4. Managerial motives.
108
Q

How to evaluate the strategy of a diversified company?

A
  1. Evaluate industry attractiveness
  2. Evaluate business unit competitive strength
  3. Check for good resource fit
  4. Rank business units and assign a priority for resource allocation
  5. Crafting new strategies
109
Q

What is paochialism?

A

A narrow, restricted view of the world that fails to recognize other people have distinct and important differences in how they live and work. This can lead to issues of trust and prevent employee development and promotions.

110
Q

What is ethnocentricism?

A

Ethnocentrism is the belief in the intrinsic superiority of the nation, culture, or group to which one belongs, often accompanied by feelings of dislike for other groups.

111
Q

What is recency effect?

A

The recency effect is an order of presentation effect that occurs when more recent information is better remembered and receives greater weight in forming a judgment than does earlier-presented information.

112
Q

Why do companies enter foreign markets?

A
  1. To gain access to new customers.
  2. To achieve lower costs through economies of scale, experience, and increased purchasing power.
  3. To gain access to low-cost inputs of production.
  4. To further exploit its own competencies.
  5. To gain access to resources and capabilities located in foreign markets.
113
Q

Extracting raw material and transportation and shipping to the production site are examples of upstream value chain activities or down stream value chain activities?

A

Upstream value chain activities

114
Q

What are downstream value chain activities?

A

Downstream activities are those that move the product out from the assembly plant and they include distributors, shipping partners, after sales service, and point-of-sale stops along the way, such as wholesalers and retailers.

115
Q

What are the three main international strategies?

A

Multidomestic strategies - Think local, act local
Global strategies - Think global, act global
Transactional strategy - Think global, act local.

116
Q

What is the Toyota Production System?

A

Just-in-time (JIT) manufacturing, also known as just-in-time production or the Toyota Production System (TPS), is a methodology aimed primarily at reducing times within the production system as well as response times from suppliers and to customers.

117
Q

What are Profit sanctuaries?

A

Profit sanctuaries are country markets or geographic regions in which a company derives substantial profits because of a strong protected market position.

118
Q

What is cross market subsidization?

A

It is a powerful competitive move in one market using the resources and profits diverted from operations in another market.

119
Q

What are the first three action tasks for building an executive capable organization?

A
  1. Staffing
  2. Acquiring, developing, and strengthening the resources and capabilities
  3. Structuring the organization and work effort
120
Q

What is a Goldilock’s movement?

A

When there are enough policies, consistently applied, to give organizational members clear direction and place reasonable boundaries on their actions, while empowering them to act within the boundaries in pursuit of company goals.

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