Chapter 1 Flashcards by Austin Hale

A(n) ______ occurs when a firm performs below the industry average or is outperformed by its competitors.

competitive disadvantage

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What is the overall purpose of a firm’s strategy?

Perform better than other companies in the same industry.

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Michael’s Deli is able to perform at the same level as its primary competitor. Michael’s Deli has ______.

competitive parity

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A good strategy consists of three elements. The first element is accomplished through analysis of the firm’s external and internal environments. We also call this ______.

a diagnosis of the competitive advantage

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When a firm works to gain a competitive advantage by providing better goods and services than its rivals, it is employing a ______strategy.

differentiation

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Based on its long dominance as a coffeehouse chain, Starbucks has ______.

a sustainable competitive advantage

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Andrew’s Home Center has created a unique situation for itself in its industry that allows the company to not only provide excellent value to its customers but also control its costs. This is known as ______.

strategic positioning

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Which of the following is the best indicator that Tesla’s startup master plan has worked as intended?

Tesla generated 500,000 preorders for an unseen model.

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If a firm has a 10% return on invested capital while the industry average return on invested capital is 18%, the firm has a(n)______.

competitive disadvantage

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Managers often have to make decisions between two conflicting strategic options, otherwise known as______.

trade-offs

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When does a situation of competitive parity exist?

Two or more firms achieve the same performance results.

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A well-devised strategy is about which two things?

What to do and what not to do

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What is the best definition of a cost leadership strategy?

Offering similar goods and services at a lower price.

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Strategic positioning allows managers to ______.

provide customers value while controlling costs

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What is the best definition of the Red Queen effect?

Companies copy each other but do not change strategic positions.

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Which of the following statements is true about Tesla, the manufacturer of all-electric cars?

It has a high market valuation.

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True or false: A statement such as, “We will be the biggest company in the world,” is an example of strategy.

false

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Walmart and Nordstrom maintain very different strategic profiles, one based on cost-leadership and the other based on differentiation through superior customer service. This is an example of ______.

the trade-offs required by strategic positioning

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Firms should identify a ______ so that employees can determine if they are making progress in addressing it.

clear competitive challenge

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Managers have ______ resources in their quest for competitive advantage.

limited

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Which statement is true about pricing strategies, internet strategies, alliance strategies, and brand strategies?

They may be a necessary part of a firm’s initiatives to support its competitive strategies.

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A successful business strategy creates ______ for both producers and consumers.

value

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What are negative outcomes of the Red Queen effect?

-Companies have fewer resources to improve product lines.
-Companies expend energy to gain little advantage.
-Companies copy each other, which reduces customer choice.

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The stakeholders of a firm are ______.

individuals or groups that can affect and are affected by the actions of the firm

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Which statement about strategies is true?

A statement of desire on its own often leads to goal conflict.

Describe the type of contribution of each stakeholder to a firm: shareholders, creditors, employees, communities

-Shareholders – provide capital. -Creditors – provide financing in the form of loans. -Employees – provide time and talent. -Communities – provide real estate and public safety.

Why should a firm define a clear competitive challenge?

so that employees can assess their progress toward addressing it

Customers, suppliers, creditors, unions, and governments are known as ______.

external stakeholders

A firm's overall efforts to gain and sustain competitive advantage is referred to as which of the following?

a competitive strategy

True or false: A strategic leader's job is to focus like a laser on shareholders.

false

A firm that successfully executes a strategy benefits society by ______.

-creating value -reinvesting profits and increasing employment

Effective stakeholder management______.

helps a firm build a strong public reputation

What term describes the groups or individuals who can impact or be impacted by a firm's actions?

stakeholders

Stakeholder impact analysis is a decision tool that helps a company do which of the following?

-Act as a good corporate citizen. -Achieve a competitive advantage.

What do shareholders receive from firms in return for their contribution of capital?

stock dividends

Which of the following are the three important stakeholder attributes managers must pay particular attention to during stakeholder impact analysis?

power, legitimacy, urgency

Who among the following are considered internal stakeholders?

Employees, Board members, Stockholders

Five steps of the stakeholder impact analysis in order

1. Who are our stakeholders? 2. What are our stakeholder's interests? 3. What opportunities and threats do our stakeholders present? 4. What economic, legal, ethical, and philanthropic responsibilities do we have to our stakeholders? 5. What should we do to effectively address the stakeholder concerns?

Stakeholder strategy argues that focusing exclusively on the needs of ______ places the firm at risk of failure.

shareholders

When identifying stakeholders, a firm should focus on those stakeholders that ______.

currently have, or could potentially have, a material effect on the firm

Which of the following are outcomes of effective stakeholder management?

-It leads to beneficial cooperation from stakeholders. -It helps the firm achieve predictable and stable returns. -It lowers the cost of business transactions by building trust.

In the ______ step of the stakeholder impact analysis the firm identifies their stakeholders' interests and claims according to the power, legitimacy, and urgency framework.

second

Stakeholder impact analysis is a ______-step process that allows managers to better understand and address stakeholders' needs.

Which statement about shareholders and employees is true?

Employees are often made into shareholders through employee stock ownership plans.

When a stakeholder has power over a company that stakeholder is ______.

able to influence the company to do something it would otherwise not do

True or false: Although they are more vocal, activist investors have the same amount of power as individual investors.

False

The third step of stakeholder impact analysis requires managers to identify the ______ presented by internal and external stakeholders.

opportunities and threats

In which step of a stakeholder impact analysis do firms identify those stakeholders that currently have, or potentially can have, a material effect on the company?

First

In the second step of the stakeholder impact analysis, managers need to identify and understand stakeholders' ______.

Interests and claims

What are the categories of expectations that society has of the business enterprise as described in the CSR framework?

Economic, Legal, Philanthropic, Ethical

Which of the following incentivize workers by offering them discounted shares or retirement plans based on company stock?

employee stock ownership plans

Which framework helps firms to identify their economic, legal, ethical, and philanthropic obligations to society?

corporate social responsibility

Shareholder activists, such as Bill Ackman and Carl Icahn, have much more power over a firm than individual investors, because they ______.

-are able to buy or sell a much larger number of shares than individuals can. -can exercise block-voting rights or otherwise influence the corporate governance process.

In the ______ step of the stakeholder impact analysis, the firm identifies the opportunities and threats that stakeholders present to the firm.

third

Which of the four corporate social responsibilities is considered first and foremost for business enterprises?

Economic

In the ______ step of the stakeholder impact analysis, firms identify their various social responsibilities to stakeholders.

Fourth

The concept, or framework, of corporate social _______ guides firms in identifying and addressing their economic, legal, ethical, and philanthropic obligations to society.

responsibility

True or false: Firms should obey all the laws, including but not limited to labor, consumer protection, and the environment.

True

Starbucks's actions to educate its workers and management about racism indicates that the firm takes its ______ responsibilities seriously.

ethical

Microsoft donating more than $3 billion in cash and software to people in need is an example of which type of corporate social responsibility?

philanthropic

Among the various types of responsibilities a business firm has, which are specifically considered to be economic responsibilities?

-giving investors a return on invested capital. -repaying debts to creditors.

Which of the elements of the pyramid of corporate social responsibilities are result from a society’s expectations toward business?

philanthropic responsibilities and ethical responsibilities

Which legal developments allow business to function as an institution?

property rights and contract enforcement

In the ______ step of the stakeholder impact analysis, managers need to decide the appropriate course of action for the firm in relation to stakeholder concerns.

fifth

Internet privacy, genetic engineering, and stem-cell research are examples of areas in which a firm's ______ responsibilities exceed its legal responsibilities.

ethical

Which of the following statements regarding tasks in the AFI strategy framework is true?

The tasks are very interdependent.

The idea that firms should voluntarily give back to society when they are able to do so is known as ______.

corporate citizenship

Which topics should be considered during the analysis phase of the AFI framework?

-the firm's business model and competitive advantages. -the role of strategic leadership and the strategy process. -the external environment and associated challenges. -the firm's internal strengths and resources.

In a(n) ______ strategy formulation, managers focus on deciding HOW the firm should compete.

business

Describe the following responsibilities: Philanthropic, Ethical, Legal, and economic

-Philanthropic - corporate citizenship. -Ethical - do what is right, just, and fair. -Legal - define minimum standard under the law. -Economic - gain and sustain competitive advantage.

The question "How do we implement the formulated strategy through an organizational structure, culture, and control system that values and encourages ethical behavior?" would most likely be examined by managers in the ______ phase of the AFI strategy framework.

implementation

How should managers prioritize stakeholder concerns in the final step of stakeholder impact analysis?

by considering the power, legitimacy, and urgency of stakeholder claims

In a nutshell, strategy is the art and science of______.

success and failure

Using a(n) ______ strategy formulation, managers examine where and how the firm should compete around the world.

global

In the ______ step of the strategy implementation phase of the AFI strategy framework, managers would examine how the firm should be structured in order to implement the desired strategy.

organizational design

To which types of organizations can we apply the principles of strategic management?

all types of organizations