Chapter 1

Question 1

strategic leadership

Answer 1

creating competitive advantage through effective management of the strategy-making process

Question 2

strategy formulation

Answer 2

selecting strategies based on analysis of an organization’s external and internal environment

Question 3

strategy implementation

Answer 3

putting strategies into action

Question 4

risk capital

Answer 4

equity capital invested with no guarantee that stockholders will recoup their cash or earn a decent return

Question 5

shareholder value

Answer 5

returns that shareholders earn from purchasing shares in a company

Question 6

profitability

Answer 6

the return a company makes on the capital invested in the enterprise

Question 7

profit growth

Answer 7

the increase in net profit over time

Question 8

competitive language

Answer 8

the achieved advantage over rivals when a company’s profitability is greater than the average profitability of firms in its industry

Question 9

sustained competitive advantage

Answer 9

a company’s strategies enable it to maintain above-average profitability for a number of years

Question 10

business model

Answer 10

the conception of how strategies should work together as a whole to enable the company to achieve competitive advantage

Question 11

general managers

Answer 11

managers who bear responsibility for the overall performance of the company or for one of its major self-contained subunits or divisions

Question 12

functional managers

Answer 12

managers responsible for supervising a particular function, that is, a task, activity, or operation such as accounting, marketing, research and development, information technology or logistics

Question 13

multidivisional company

Answer 13

a company that competes in several different businesses and has created a separate, self-contained division to manage each

Question 14

business unit

Answer 14

a self-contained division that provides a product or service for a particular market

Question 16

mission

Answer 16

the purpose of the company, or a statement of what the company strives to do

Question 17

vision

Answer 17

the articulation of a company’s desired achievements or future state

Question 18

values

Answer 18

a statement of how employees should conduct themselves and their business to help achieve the company mission

Question 20

SWOT analysis

Answer 20

the comparison of strengths, weaknesses, opportunities, and threats

Question 21

4 categories of SWOT analysis

Answer 21

1. functional-level strategies
2. business-level strategies
3. global strategies
4. corporate-level strategies

Question 22

function-level strategies

Answer 22

directed at improving the efficiency and effectiveness of operations within a company

manufacturing, marketing, materials management, product development, customer service

Question 23

business-level strategies

Answer 23

the business’s overall competitive theme, the way it positions itself in the marketplace to gain competitive advantage, and the different positioning strategies that can be used in different industry settings

cost leadership, differentiation, niche focus

Question 24

global strategies

Answer 24

how to expand operations outside the home country to grow and prosper in a world where competitive advantage is determined at a global level

Question 25

corporate-level strategies

Answer 25

Answer the ?s: What business or businesses should we be in to maximize the long-run profitability and profit growth of the organization, and how should we enter and increase our presence in these businesses to gain competitive advantage?

Question 26

scenario planning

Answer 26

formulating plans based upon “what if” scenarios aboutthe future

Question 27

cognitive biases

Answer 27

systematic errors in decision making that arise from the way people process information

Question 28

prior hypothesis bias

Answer 28

cognitive bias that occurs when decision-makers have strong prior beliefs and tend to make decisions on the basis of these beliefs, even when presented with evidence that their beliefs are wrong

Question 29

escalating commitment

Answer 29

cognitive bias that occurs when decision-makers, having already committed significant resources to a project, commit even more resources after receiving feedback that the project is failing

Question 30

reasoning by analogy

Answer 30

use of simple analogies to make sinse out of complex problems

Question 31

representativeness

Answer 31

a bias rooted in the tendency to generalize from a small sample or even a single, vivid anecdote

Question 32

illusion of control

Answer 32

cognitive bias rooted in the tendency to overestimate one’s ability to control events

Question 33

availability error

Answer 33

bias that arises from our predisposition to estimate the probability of an outcome based on how easy the outcome is to imagine

Question 34

devil’s advocacy

Answer 34

technique in which one member of a decision-making team identifies all the considerations that might make a proposal unacceptable

Question 35

dialectic inquiry

Answer 35

the generation of a plan (a thesis) and a counterplan (an antithesis) that reflect plausible but conflicting courses of action

Question 36

outside view

Answer 36

identification of past successful or failed strategic initiatives to determine whether those initiatives will work for the project at hand

Question 37

decentralized planning

Answer 37

“ivory tower” concept of planning

erroneously treat planning exclusively as a top-management responsibility

resulting in strategic plans formulated in a vacuum by top managers who may be disconnected from current operating realities

GE case study…
1. designs small appliances
2. ignores the expertise of lower-level managers

Question 38

The Astute Use of Power

Answer 38

classic leadership article by Edward Wrapp