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

Profitability Growth

Answer 7

The increase in net profit over time

Question 8

Competitive Advantage

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 sub-units 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, R&D, IT, or logistics

Question 13

Multi divisional Company

Answer 13

A company that competes in several different business 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 15

Mission

Answer 15

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

Question 16

Vision

Answer 16

The articulation of a company’s desired achievements or future state.

Question 17

Values

Answer 17

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

Question 18

SWOT Analysis

Answer 18

The comparison of strengths, weaknesses, opportunities, and threats.

Question 19

Scenario Planning

Answer 19

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

Question 20

Cognitive Biases

Answer 20

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

Question 21

Prior Hypothesis Bias

Answer 21

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

Question 22

Escalating Commitment

Answer 22

A 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 23

Reasoning by Analogy

Answer 23

Use of simple analogies to make sense out of complex problems.

Question 24

Representativeness

Answer 24

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

Question 25

The Illusion of Control

Answer 25

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

Question 26

Availability Error

Answer 26

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

Question 27

Devil’s Advocacy

Answer 27

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

Question 28

Dialectic Inquiry

Answer 28

The generation of a plan (a thesis) and a counter-plan ( an antithesis) that reflect plausible but conflicting courses of action.

Question 29

Outside View

Answer 29

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

Question 30

Outside View

Answer 30

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

Question 31

Strategy

Answer 31

A set of related actions that managers take to increase their company’s performance.