Chap 1 Strategy and the Strategic Management Process Flashcards
based on the strategic management process, the objective when making a strategic choice is to choose a strategy which meets what 4 criteria?
- supports the firms mission 2. consistent with the firm’s objectives 3. exploits opportunities in a firms environment with a firms strengths 4. neutralizes threats in a firm’s environment while avoiding a firm’s weaknesses
who do you calculate gross profit margin %?
(sales-COGS)/sales
how do you calculate the debt to equity ratio?
total debt/total equity
missions define what 2 things?
- what a firm aspires to be in the long run 2. what a firm wants to avoid in the meantime
a firm with normal economic performance will earn its what?
cost of capital
what is the first step of the strategic management process?
define the mission
how do you calculate he average collection period ratio?
A/R/average daily sales
a strategy is a theory about how to ___ competitive advantages
gain
how do you calculate ROE?
profit after taxes/total stockholders equity
when does a firm have competitive advantage?
when it is able to create more economic value than rival firms
competitive advantage when comparing two firms comes from what 2 main sources?
- the perceived benefits for its customers 2. economic cost advantage
what is the average collection period ratio?
a measure of the time it take a firm to receive payment after a sale has been made
objectives are specific, measurable targets a firm can use to evaluate the ____ to which it is realizing its mission
extent
a firm with average accounting performance has competitive ?
parity
the difference between the perceived benefits gained by a consumer that purchases a firms products and the full economic cost of these products
economic value
what is the strategic management process?
a sequential set of analyses and choices that can increase the likelihood that a firm will choose a good strategy.
how do you calculate the times interest earned ratio?
profit before interest and taxes/total interest charges
what are 5 common corporate level strategies?
- vertical integration 2. diversification 2. strategic alliances 4. mergers and acquisitions 5. global
theories of how to gain competitive advantage in an industry that emerge over time or that have been radically reshaped once they are initially implemented are what kind of strategies?
emergent
what is the A/R turnover ratio?
a measure of the average time it takes a firm to collect on credit sales
strategies are based on a set of assumptions and hypotheses about what?
the way competition in the industry is likely to evolve and how that evolution can be exploited to earn a profit
how do you calculate ROA?
profit after taxes/total assets
what does a firm do during an internal analysis (3)?
1.identifies its organizational strengths and weaknesses 2. identify which of its resources and capabilities are likely to be sources of competitive advantage or not. 3. they identify areas of its organization that require improvement and change
how do you calculate the A/R turnover ratio?
annual credit sales/A/R
what is the debt to assets ratio?
a measure of the extent to which debt has financed a firms business activities. the higher the greater the risk of bankruptcy
firms that generate less economic value than their rivals have a what?
competitive disadvantage
a firm with above average accounting performance enjoys a competitive ?
advantage
what is the gross profit margin?
a measure of sales available to cover operating expenses and still generate a profit. larger is usually better
what are the 2 approaches for measuring a firms competitive advantage?
accounting or economic performance is is examined
what 4 aspects of an industry make it more likely a firm operating in it will have a sustained competitive advantage?
- informationally complex 2. require customers to know a great deal in order to use an industry’s products 3. require a great deal of research and development 4. have significant economies of scale
missions are often written down in the form of what?
mission statements
persistent high performance is related to attributes of the ____ and the _____ while persistent low performance is caused by attributes of a ____ ____
industry corporation business unit
what is strategy?
the theory about how to gain competitive advantages
what is ROA?
a measure of return on total investment in a firm. larger is usually better
what are the 4 categories of accounting ratios used to measure a firms accounting performance?
- profitability 2. liquidity 3. leverage 4. activity
in visionary firms, the pressure for short term performance is balanced by what?
a widespread commitment to values and beliefs that focus more on a firm’s long term performance
the theory about how to gain competitive advantages is called a ?
strategy
high quality objectives have what 2 features?
- they are tightly connected to elements of a firms mission 2. they are relatively easy to measure and track over time
a firms mission is a broad statement of it’s _____ and _____
purpose values
what is the quick ratio?
a measure of the ability of a firm to meet its short term obligations without selling off its current inventory. a ratio of 1 is thought to be acceptable in many industries
a sequential set of analyses and choices that can increase the likelihood that a firm will choose a good strategy is what process?
the strategic management process
what is economic value?
the difference between the perceived benefits gained by a consumer that purchases a firms products and the full economic cost of these products
what are the 2 large categories of strategic choices available to firms?
- business level strategies 2. corporate level strategies
how do you calculate the current ratio?
current assets/current liabilities
what is the inventory turnover ratio?
a measure of the speed with which a firms inventory is turning over
objectives are ____ , measurable targets a firm can use to evaluate the extent to which it is realizing its mission
specific
what are the 3 organizational policies and practices that are particularly important in implementing a strategy?
- the firms formal organizational structure 2. firms formal and informal management control systems 3. firms employee compensation policies
what is a firm’s long term purpose called?
its mission
when is it difficult to compare the accounting perfomance of firms ?
when generally accepted accounting standards and principals are not applied in generating their accounting statements or they use different standards in doing so