Chapter 1

Question 1

Strategy

Answer 1

Set of related actions that managers take to increase their company’s performance

Question 2

Strategic leadership

Answer 2

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

Question 3

Strategy formulation

Answer 3

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

Question 4

Strategy implementation

Answer 4

Putting strategies into action

Question 5

Shareholder value

Answer 5

Returns that shareholders earn from purchasing shares in a company
Source:
- Capital appreciation
- Dividend payments

Question 6

Growth stalls

Answer 6

After a burst of energy, growth does not descend gradually, but drops like a stone

Question 7

Competitive advantage

Answer 7

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

Question 8

Sustained competitive advantage

Answer 8

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

Question 9

What is strategy?

Answer 9

• Creating uniqueness
• Not the same of operational effectiveness
• Forging strategic fit
• Not the same as business model

Question 10

Business model

Answer 10

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

Strategy is an action that a firm takes to execute a business model

Question 11

Multidivisional company

Answer 11

Competes in several different businesses and has a separate self-contained division to manage each

Question 12

General manager

Answer 12

Bear responsability for a company’s overall performance or for one of its major self-contained divisions

Question 13

Functional manager

Answer 13

Responsible for supervising a particular function, task, activity, or operation

Question 14

What are the levels of strategic management?

Answer 14

• Corporate level
• Business level
• Functional level

Question 15

Formal Strategic Planning Process

Answer 15

1. Select corporate mission, vision, and goals
2. Analyze the external competitive environment
3. Analyze the internal operating environment
4. Select organizational strategies
5. Implement the strategies

Question 16

Mission

Answer 16

Its reason for existence

Question 17

Vision

Answer 17

A desired future state

Question 18

Values

Answer 18

A statement of key values that a firm is commited to

Question 19

Goals

Answer 19

Precise, measurable, adress critical issues, challenging but realistic, and with appropriate time parameters

Question 20

External analysis

Answer 20

Identifies strategic opportunities and threats that will affect how an organization pursues its missions

Question 21

Functional-level strategies

Answer 21

Directed at improving the effectiveness of functional operations within a company

Question 22

Business-level strategies

Answer 22

Encompass the business’ overall competitive theme, how it positions itself in the market to gain a competitive advantage

Question 23

Global strategies

Answer 23

Adress how to expand operations outside the home country

Question 24

Corporate-level strategies

Answer 24

Determine the businesses a company should be in to maximize profitability and profit growth

Question 25

Scenario planning

Answer 25

Formulating plans that are based on “what-if” scenarios about the future

Question 26

Cognitive biases

Answer 26

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

Question 27

Confirmation biases

Answer 27

Tend to make decisions on the basis of prior beliefs, even when presented with evidence that those beliefs are wrong

Question 28

Escalating commitment

Answer 28

Occurs when decisions makers, having already commited signficant resources to a project, commit even more even after receiving feedbacks that the project is a failure

Question 29

Reasoning by analogy

Answer 29

Use of simple analogies to make sens out of a complex problem

Question 30

Representativeness

Answer 30

Tendency to generalize from a small sample or a single vivid anecdote, violating the statistical law of large numbers

Question 31

Illusion of control

Answer 31

A bias rooted in the tendency to overestimates one’s ability to control events

Question 32

Availability error

Answer 32

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